Question

Calculate Total Assets to Debt Ratio from the following information :

$\begin{array}{cccc}\text{Particulars}& \text{Rs.}& \text{Particulars}& \text{Rs.}‘\\ \text{Long-term Borrowings}& 18,00,000& \text{Share Capital}& \text{10,00,000}\\ \text{Long-term Provisions}& 2,00,000& \text{Security Premium Reserve}& \text{3,00,000}\\ \text{Trade Payables}& 5,00,000& \text{General Reserve}& \text{5,00,000}\\ & & \text{Surplus i.e., Balance in}& \\ & & \text{Statement of Profit and Loss}& \text{(2,00,000)}\end{array}$

Answer 1

Total Assets to Debt Ratio = $\frac{\text{Total Assets}}{\text{Debt or Long term Debts}}$

Long term Debts
= Long term Borrowings + Long term Provisions
= Rs. 18,00,000 + Rs. 2,00,000
= Rs. 20,00,000

Total Assets
= Shareholder's Funds (i.e., Share Capital + Securities Premium Reserve + General Reserve + P & L Balance ) + Total Debts (i.e., Long term Borrowings + Long term Provisions + Trade Payables)

= Rs. 10,00,000 + Rs. 3,00,000 + Rs. 5,00,000 - Rs. 2,00,000 + Rs. 18,00,000 + Rs. 2,00,000 + Rs. 5,00,000

= Rs. 41,00,000

Total Assets to Debt Ratio = $\frac{\text{Rs. 41,00,000}}{Rs.20,00,000}=2.05:1$