Question 33 Chapter 4 of +2-B

II. Solvency (Long-Term) Ratio

33. (Debt Equity Ratio/Proprietary Ratio/Total Asset to Debt Ratio) Calculate

1. Debt Equity Ratio
2. Proprietary Ratio
3. Total Assets to Debt Ratio
From the following information
 12% Debentures 5,00,000 Loan from HDFC 2,50,000 Trade Payable 3,50,000 Equity share Capital 12,50,000 Reserve 2,50,000 Surplus i.e. Balance in Statement of Profit and Loss 1,50,000 Goodwill 2,50,000 Other fixed Assets 17,50,000 Current Assets 7,50,000

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The solution of Question 33 Chapter 4 of +2-B: –

 (i) Debt Equity Ratio = Total Long term Debt Shareholder’s Fund
 Total Long term Debt = 12% Debentures + Loan from HDFC = ₹ 5,00,000 + ₹ 2,50,000 = ₹ 7,50,000 Shareholder’s Fund = Equity share Capital + Reserve + Surplus i.e. Balance in Statement of Profit and Loss = ₹ 12,50,000 + ₹ 2,50,000 + ₹ 1,50,000 = ₹ 16,50,000
 Debt Equity Ratio = ₹ 7,50,000 ₹ 16,50,000 = 0.45: 1

 (ii) Proprietary Ratio = Proprietor’s Funds Total Assets
 Proprietor’s Funds = Equity share Capital + Reserve + Surplus i.e. Balance in Statement of Profit and Loss = ₹ 12,50,000 + ₹ 2,50,000 + ₹ 1,50,000 = ₹ 16,50,000 Shareholder’s Fund = Fixed Assets + current Assets = ₹ 17,50,000 + ₹ 7,50,000 = ₹ 25,00,000
 Debt Equity Ratio = ₹ 16,50,000 ₹ 25,00,000 = 0.66 : 1

 (iii) Total Assets to Debt Ratio = Total Assets Long term Debt
 Total Assets = Other Fixed Assets + Current Assets + Goodwill = ₹ 17,50,000 + ₹ 7,50,000 + ₹ 2,50,000 = ₹ 27,50,000 Long term Debt = 12% Debentures + Loan from HDFC = ₹ 5,00,000 + ₹ 2,50,000 = ₹ 7,50,000
 (iii) Total Assets to Debt Ratio = ₹ 27,50,000 ₹ 7,50,000 = 3.66: 1

Also, Check out the solved question of previous Chapters: –

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