Question 35 Chapter 4 of +2-B

II. Solvency (Long-Term) Ratio

35. (Debt Equity Ratio/Proprietary Ratio) Calculate the following ratios from the balance sheet given below :
(a) Debt equity ratio (b) Proprietary ratio

 Particulars ₹ I. Equity and Liabilities Shareholders’ Funds Equity Share capital 2,00,000 Preference Share Capital 50,000 Reserve and Surplus 50,000 Non Current Liabilities Long term Borrowings 12% Mortgage Loan 2,20,000 10% Debentures 80,000 Current Liabilities Short term Borrowings Bank overdraft 50,000 Trade Payable 40,000 Outstanding Expenses 10,000 7,00,000 II. Assets Non Current Assets Tangible Assets Fixed Assets 5,00,000 Current Assets Inventory 1,10,000 Trade Receivable 60,000 Prepaid Expenses 4,000 Cash in hand 26,000 7,00,000

## The solution of Question 35 Chapter 4 of +2-B: –

 (i) Debt Equity Ratio = Total Long term Debt Shareholder’s Fund
 Total Long term Debt = 12% Mortgage Loan + 10% Debentures = ₹ 2,20,000 + ₹ 80,000 = ₹ 3,00,000 Shareholder’s Fund = Equity share Capital Preference share Capital + Reserves and Surplus = ₹ 2,00,000 + ₹ 50,000 + ₹ 50,000 = ₹ 3,00,000
 Debt Equity Ratio = ₹ 3,00,000 ₹ 3,00,000 = 1: 1

 (ii) Proprietary Ratio = Proprietor’s Funds Total Assets
 Proprietor’s Funds = Equity share Capital Preference share Capital + Reserves and Surplus = ₹ 2,00,000 + ₹ 50,000 + ₹ 50,000 = ₹ 3,00,000 Total Assets = Fixed Assets + Inventory + Trade Receivable + Prepaid Expenses +Cash at Bank = ₹ 5,00,000 + ₹ 1,10,000 + ₹ 60,000 + ₹ 4,000 + ₹ 26,000 = ₹ 7,00,000
 Debt Equity Ratio = ₹ 3,00,000 ₹ 7,00,000 = 0.43: 1

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