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✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
The Balance Sheet had the following amounts as at 31st March, 2021:
| Particulars | Amount (₹) | Particulars | Amount (₹) |
|---|---|---|---|
| 10% Preference Share Capital | 5,00,000 | Current Assets | 12,00,000 |
| Equity Share Capital | 15,00,000 | Current Liabilities | 8,00,000 |
| Securities Premium Reserve | 1,00,000 | Investments (in other companies) | 2,00,000 |
| Reserves and Surplus | 4,00,000 | Fixed Assets (Cost) | 60,00,000 |
| Long-term Loan from IDBI @ 9% | 30,00,000 | Depreciation Written Off | 14,00,000 |
Calculate ratios indicating the Long-term and Short-term financial position of the company.
(i) Debt-Equity Ratio is an indicator of long-term financial health; it shows the proportion of long-term loan compared to Shareholders’ Funds.
Debt = Loan from IDBI @ 9% = ₹30,00,000
Equity = 10% Preference Share Capital + Equity Share Capital + Reserves & Surplus
= 5,00,000 + 15,00,000 + 4,00,000 = ₹24,00,000
Debt-Equity Ratio = 30,00,000 ÷ 24,00,000 = 1.25:1
(ii) Current Ratio is an indicator of short-term financial position; it shows the proportion of Current Assets compared to Current Liabilities.
Current Ratio = Current Assets ÷ Current Liabilities = 12,00,000 ÷ 8,00,000 = 1.5:1
Note: Securities Premium Reserve is not separately added when computing Equity here, since it is already included within the given Reserves and Surplus figure.
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.48 - Accounting Ratios", focusing on key definitions, step-by-step concepts, applications, and revision guidelines relevant to Chapter 4 - Accounting Ratios.
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