Question

Total Debt ₹ 60,00,000; Shareholders' Funds ₹ 10,00,000; Reserves and Surplus ₹ 2,50,000; Current Assets ₹ 25,00,000; Working Capital ₹ 5,00,000. Calculate Total Assets to Debt Ratio.

Answer 1

$\text{Total Assets to Debt Ratio =}\frac{\text{Total Assets}}{\text{Long Term Debt}}$
Working Capital = Current Assets – Current Liabilities
5,00,000 = 25,00,000 – Current Liabilities
Current Liabilities = Rs 20,00,000
Long Term Debts = Total Debt – Current Liabilities
= 60,00,000 – 20,00,000
= Rs 40,00,000
Total Assets = Total Liabilities = Total Debt + Shareholders’ Funds
= 60,00,000 + 10,00,000
= Rs 70,00,000
$\text{Total Assets to Debt Ratio =}\frac{\text{70},00\text{,000}}{\text{40,00},\text{000}}\text{= 7 : 4 or 1.75 : 1}$