Question 34 Chapter 4 of +2-B

Question 34 Chapter 4 of +2-B

II. Solvency (Long-Term) Ratio

34. (Debt Equity Ratio/Proprietary Ratio/Total Asset to Debt Ratio) From the following information calculate (i) Debt Equity Ratio, (ii) Proprietary Ratio, (iii) Total Asset to Debt Ratio.

Particulars
I. Equity and Liabilities 
Shareholders’ Funds 
Equity Share capital3,75,000
Reserve and Surplus 
General Reserve1,50,000
Non Current Liabilities 
Long term Borrowings 
12% Debentures1,25,000
Current Liabilities 
Short term Borrowings  
Bank overdraft50,000
Trade Payable3,00,000
 10,00,000
II. Assets 
Non Current Assets 
Fixed Assets4,12,000
Long-term Investments40,000
Current Assets 
Inventory2,27,000
Trade Receivable3,10,000
Cash in hand10,000
 10,00,000

 

The solution of Question 34 Chapter 4 of +2-B: – 

(i) Debt Equity Ratio=Total Long term Debt
Shareholder’s Fund
Total Long term Debt=12% Debentures
 =₹ 1,25,000
Shareholder’s Fund=Equity share Capital + General Reserve
 =₹ 3,75,000 + ₹ 1,50,000
 =₹ 5,25,000
Debt Equity Ratio=₹ 1,25,000
₹ 5,25,000
   
 =0.238: 1

 

(ii) Proprietary Ratio=Proprietor’s Funds
Total Assets
Proprietor’s Funds=Equity share Capital + General Reserve
 =₹ 3,75,000 + ₹ 1,50,000
 =₹ 5,25,000
Total Assets=Fixed Assets + Long Term Investments + Inventory + Trade Receivable +Cash at Bank
 =₹ 4,12,500 + ₹ 40,000 + ₹ 2,27,500 + ₹ 3,10,000 + ₹ 10,000
 =₹ 10,00,000
Debt Equity Ratio=₹ 5,25,000
₹ 10,00,000
   
 =0.525: 1

 

(iii) Total Assets to Debt Ratio=Total Assets
Long term Debt
Total Assets=Fixed Assets + Long Term Investments + Inventory + Trade Receivable +Cash at Bank
 =₹ 4,12,500 + ₹ 40,000 + ₹ 2,27,500 + ₹ 3,10,000 + ₹ 10,000
 =₹ 10,00,000
Long term Debt=12% Debentures
 =₹ 1,25,000
(iii) Total Assets to Debt Ratio=₹ 10,00,000
₹ 1,25,000
   
 =8: 1

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

Usha Publication – Accountancy PSEB (Class 12) – Volume I – Solution

Usha Publication – Accountancy PSEB (Class 12) – Volume II – Solution

Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication

2 Book 3 min 225x300 - Question 34 Chapter 4 of +2-B  - USHA Publication  12 Class
T.S. Grewal’s Analysis of Financial Statements

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