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✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
On the basis of the following information calculate: (i) Debt to Equity Ratio; and (ii) Working Capital Turnover Ratio.
| Cash Sales | 40,00,000 | Paid-up Share Capital | 17,00,000 |
| Credit Sales | 20,00,000 | 6% Debentures | 3,00,000 |
| Cost of Goods Sold | 35,00,000 | 9% Loan from Bank | 7,00,000 |
| Other Current Assets | 8,00,000 | Debenture Redemption Reserve | 3,00,000 |
| Current Liabilities | 4,00,000 | Closing Inventory | 1,00,000 |
(i) Debt to Equity Ratio
Long-term Debts = 6% Debentures + 9% Loan from Bank = 3,00,000 + 7,00,000 = ₹10,00,000
Equity = Paid-up Share Capital + Debenture Redemption Reserve = 17,00,000 + 3,00,000 = ₹20,00,000
Debt to Equity Ratio = 10,00,000 ÷ 20,00,000 = 0.5 : 1
(ii) Working Capital Turnover Ratio
Current Assets = Other Current Assets + Closing Inventory = 8,00,000 + 1,00,000 = ₹9,00,000
Working Capital = Current Assets − Current Liabilities = 9,00,000 − 4,00,000 = ₹5,00,000
Net Sales = Cash Sales + Credit Sales = 40,00,000 + 20,00,000 = ₹60,00,000
Working Capital Turnover Ratio = 60,00,000 ÷ 5,00,000 = 12 times
Accounting & Commerce Educator
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.
This guide covers "T.S. Grewal Class 12 Vol 3 Chapter 4 Q.181 - Accounting Ratios", focusing on key definitions, step-by-step concepts, applications, and revision guidelines relevant to Chapter 4 - Accounting Ratios.
It is primarily curated for Class 11 and Class 12 high school commerce, accounting, and economics students, as well as aspirants preparing for board exams or CA Foundation.
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