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Accounting Ratios — Accountancy STD 12 Commerce — Question

CBSE BoardEnglish MediumSTD 12 CommerceAccountancyAccounting Ratios3 Marks
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.
[Hint: Reserves and Surplus are already included in Shareholders' Funds.]
✓

Answer

Total Assets 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 = ₹ 20,00,000
Long Term Debts = Total Debt - Current Liabilities
= 60,00,000 - 20,00,000 = ₹ 40,00,000
Total Assets = Total Liabilities = Total Debt + Shareholders’ Funds
= 60,00,000 + 10,00,000 = ₹ 70,00,000
Total Assets Debt Ratio $=\frac{70,00,000}{40,00,000}=7:4\text{ or }1.75:1$

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