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Question 26 Chapter 7 - Unimax Publication Class 12 Part 2 - 2021
26. From the following particulars from the balance sheet of Khamish Ltd. As at 31st March 2022.
| Particulars | ₹ |
| Equity share capital | 9,00,000 |
| 10% preference share capital | 3,00,000 |
| Capital reserve | 1,00,000 |
| Profit & loss balance | 2,00,000 |
| 12% debentures | 70,000 |
| 10% mortgage loan | 2,00,000 |
| Current liabilities | 4,00,000 |
| Non-Current assets | 7,00,000 |
| Current assets | 6,00,000 |
Showing the full working, calculate the following ratios:
(I) Debt- equity ratio
(II) Proprietary ratio
(iii) Interest coverage ratio
Net profit after interest and tax amounted to 2,00,000
Rate of income tax was 50%
| (I) Debt equity ratio | = | Debt |
| Equity |
| Debt | = debenture + mortgage loan |
| = 70,000 + 2,00,000 | |
| Equity | = equity share capital + preference share capital + capital reserve + P&L balance |
| = 9,00,000 + 3,00,000 + 1,00,000 + 2,00,000 |
| Debt equity ratio | = | 2,70,000 | = | |
| 15,00,000 | .18 : 1 | |||
| (II) Proprietary ratio | = | Equity | ||
| Total Assets | ||||
| Total Assets | = | non-current assets + current assets | ||
| 13,00,000 | 7,00,000 + 6,00,000 | |||
| Proprietary ratio | = | 15,00,000 | = | 1.15 : 1 |
| 13,00,000 |
| (iii)Interest coverage ratio | = | net profit before interest & tax |
| fixed interest charges | ||
| Fixed interest charges | = | 12% int. on debt + 10% int. on mortgage loan |
| = | 8,400 + 20,000 = 28,400 |
Net profit before interest and tax is calculated as follows:
Net profit after interest & tax = 2,00,000
Net profit before tax = 2,00,000 x 100/(50 ) = 4,00,000
Net profit before interest & tax 4,00,000 + 28,400 = 4,28,400
| Interest coverage ratio | = | 4,28,400 | = | 15.08 times |
| 28,400 |
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Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
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