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Question

From the following calculate
(a) Debt Equity Ratio
(b) Total Assets To Debt Ratio
(c) Propietory Ratio

ItemsAmt. (Rs.)Equity Share Capital75,000Preference Share Capital25,000General Reserve50,000Accumulated Profits30,000Debentures75,000Sundry Creditors40,000Outstanding Expenses10,000Preliminary Expenses to be written off5,000



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Solution

(a) Debt Equity Ratio
=DebtEquity

Equity / Shareholders Fund
= Equity Share Capital + Preference Share Capital + General Reserve + Accumulated Profits – Preliminary Expenses Written off
= Rs. 75,000 + Rs. 25,000 + Rs. 50,000 + Rs. 30,000 – Rs. 5,000
= Rs. 1,75,000

Debt = Debenture = Rs. 75,000

Debt Equity Ratio =Rs. 75,000Rs. 1,75,000=37=3:7 or 0.43:1

(b) Total Assets to Debt Ratio
=Total AssetsDebt

Total Assets = Total Libilities

Total Liabilities
= Equity Share Capital + Preference Share Capital + General Reserve + Accumulated Profits + Debentures + Sundry Creditors + Outstanding Expenses – Preliminary Expenses to be written off
= Rs. 75,000 + Rs. 25,000 + Rs. 50,000 + Rs. 30,000 + Rs. 75,000 + Rs. 40,000 + Rs. 10,000 – Rs. 5,000
= Rs. 3,00,000

Total Assets to Debt Ratio =Rs. 3,00,000Rs. 75,000=4:1

(c) Proprietory Ratio
=Shareholders' FundNet Assets

=Rs. 1,75,000Rs. 3,00,000=712=7:12


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