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Question
Total Debt ₹ 12,00,000; Shareholders’ Funds ₹ 2,00,000; Reserves and Surplus ₹ 50,000; Current Assets ₹ 5,00,000; Working Capital ₹ 1,00,000. Calculate the Total Assets to Debt Ratio.
Hint: Reserves and Surplus are already included in Shareholders’ Funds.
Numerical
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Solution
Working Capital = Current Assets − Current Liabilities
1,00,000 = 5,00,000 − Current Liabilities
Current Liabilities = ₹ 4,00,000
Debt = Total Debt − Current Liabilities
= 12,00,000 − 4,00,000
= ₹ 8,00,000
Total Assets = Shareholders’ Funds + Total Debt
= 2,00,000 + 12,00,000
= ₹ 14,00,000
Total Assets to Debt Ratio
= `"Total Assets"/"Debt" = 1400000/800000`
= 1.75 : 1
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