12th | Ts grewal 2021-2022 Question 36 to 40 | ch:4 Accounting Ratios

Page No 4.105:

Question 36:

Total Assets  ` 2,60,000; Total Debts  ` 1,80,000; Current Liabilities  ` 20,000. Calculate Debt to Equity Ratio. 

Answer:

Total Debts = 1,80,000

Current Liabilities = 20,000

Long-term Debts = Total Debts − Current Liabilities

= 1,80,000 − 20,000 = 1,60,000

Equity = Total Assets − Total Liabilities

= 2,60,000 − 1,80,000 = 80,000

Debt equity ratio= Long-term Debt /equity=1,60,000/80,000=2:1

 



Page No 4.105:

Question 37:

Calculate Debt to Equity Ratio: Equity Share Capital  ` 5,00,000; General Reserve  ` 90,000; Accumulated Profits  ` 50,000; 10% Debentures  ` 1,30,000; Current Liabilities  ` 1,00,000.

Answer:

Equity = Equity Share Capital + General Reserve + Accumulated Profits

= 5,00,000 + 90,000 + 50,000 = 6,40,000

Debt = 10% Debentures = 1,30,000

Debt equity ratio= Debt /equity=1,30,000/6,40,000=0.203:1

 



Page No 4.105:

Question 38:

From the following information, calculate Debt to Equity Ratio: 

 

 `

10,000 Equity Shares of  ` 10 each fully paid

1,00,000

5,000; 9% Preference Shares of  ` 10 each fully paid

50,000

General Reserve 

45,000

Surplus, i.e., Balance in Statement of Profit and Loss

20,000

10% Debentures

75,000

Current Liabilities

50,000

Answer:

Long-Term Debt = Debentures =  ` 75,000
Shareholder’s Funds = Equity Share Capital + Preference Share Capital + General Reserve + Surplus
=
 ` 1,00,000 +  ` 50,000 +  ` 45,000 +  ` 20,000 =  ` 2,15,000

Debt-equity ratio= Long-Term Debt /equity=75,000/2,15,000=0.35:1



Page No 4.105:

Question 39:

Capital Employed  `8,00,000; Shareholders' Funds  `2,00,000. Calculate Debt to Equity Ratio.

Answer:

Shareholders’ Funds = 2,00,000

Capital Employed = 8,00,000

Long- Term Debts = Capital Employed − Shareholders’ Funds

= 8,00,000 − 2,00,000 = 6,00,000

Debt equity ratio= Long-term Debt /equity=6,00,000/2,00,000=3:1

 



Page No 4.105:

Question 40:

Balance Sheet had the following amounts as at 31st March, 2021:

 

 `

 

 

 `

10% Preference Share Capital

5,00,000

 

Current Assets

12,00,000

Equity Share Capital

15,00,000

 

Current Liabilities

8,00,000

Securities Premium Reserve

1,00,000

 

Investments (in other companies)

2,00,000

Reserves and Surplus

4,00,000

 

Fixed Assets-Cost

60,00,000

Long-term Loan from IDBI @ 9%

30,00,000

 

Depreciation Written off

14,00,000

Calculate ratios indicating the Long-term and the Short-term financial position of the company.

Answer:

(i) Debt-Equity Ratio is an indicator of Long-term financial health. It shows the proportion of Long-term loan in comparison of shareholders’ Funds.

Debt-Equity Ratio = Long Term Debts/Equity

Debt = Loan from IDBI @ 9% = 30,00,000

Equity = 10% Preference Share Capital + Equity Share Capital + Reserves & Surplus

= 5,00,000 + 15,00,000 + 4,00,000 = 24,00,000

Debt-Equity Ratio = 30,00,000/24,00,000 = 1.25:1

(ii) Current Ratio is an indicator of short-term financial portion. It shows the proportion of Current Assets in comparison of Current Liabilities.
Current Ratio = Current Assets/Current Liabilities

Current Assets = 12,00,000

Current Liabilities = 8,00,000

Current Ratio = 12,00,000/8,00,000 = 1.5:1

Note: In the above question, Securities Premium Reserve is not considered while computing Equity because it is already included in the amount of Reserves and Surplus.

 

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Chapter-4: Accounting Ratios | 2021-2022

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