Question

On the basis of the following information, calculate Total Assets to Debt Ratio:

Particulars		₹	Particulars		₹
Capital Employed		50,00,000	Share Capital		35,00,000
Current Liabilities		20,00,000	10% Debentures		10,00,000
Land and Building		60,00,000	General Reserve		3,00,000
Trade Receivable		4,00,000	Surplus, i.e., Balance in Statement of Profit and Loss		2,00,000
Cash and Cash Equivalents		5,00,000
Investment (Trade)		1,00,000

Answer 1

$\begin{array}{l}\text{Total Assets to Debt Ratio =}\frac{\text{Total Assets}}{\text{Long Term Debt}}\\ \end{array}$
Total Assets = Land and Buildings + Trade Receivables + Cash and Cash Equivalents + Investments (Trade)
= 60,00,000 + 4,00,000 + 5,00,000 + 1,00,000
= Rs 70, 00,000
Long Term Debts = Capital Employed - Shareholders’ funds
= 50,00,000 – 40,00,000
= Rs 10,00,000
Shareholder’s Fund = Share Capital + Reserve and Surplus
= 35,00,000 + 3,00,000 + 2, 00,000
= Rs 40,00,000

$\text{Total Assets to Debt Ratio =}\frac{\text{70},00\text{,000}}{\text{10,00},\text{000}}\text{= 7 : 1}$