Page No 4.108:
Question
56:
Calculate Proprietary Ratio from the following:
|
Equity
Shares Capital |
` 4,50,000 |
9%
Debentures |
` 3,00,000 |
|
10%
Preference Share Capital |
` 3,20,000 |
Fixed
Assets |
` 7,00,000 |
|
Reserves
and Surplus |
` 65,000 |
Trade
Investment |
` 2,45,000 |
|
Creditors |
` 1,10,000 |
Current
Assets |
` 3,00,000 |
Answer:
Total Assets = Fixed Assets + Trade Investments + Current Assets
= 7,00,000 + 2,45,000 + 3,00,000 = 12,45,000
Shareholders’ Funds = Equity Share Capital + 10% Preference Share Capital + Reserves and Surplus
= 4,50,000 + 3,20,000 + 65,000 = 8,35,000
Proprietary Ratio= Shareholders’ fund/Total Assets=8,35,000/12,45,000=0.67:1
Page No
4.108:
Question
57:
State with reason, whether the Proprietary Ratio will
improve, decline or will not change because of the following transactions if
Proprietary Ratio is 0.8 : 1:
(i) Obtained a loan of
` 5,00,000 from State Bank of India payable after five
years.
(ii) Purchased machinery of ` 2,00,000 by cheque.
(iii) Redeemed 7% Redeemable Preference Shares ` 3,00,000.
(iv) Issued equity shares to the vendor of building purchased for `
7,00,000.
(v) Redeemed 10% redeemable debentures of ` 6,00,000.
Answer:
|
Transaction |
Impact |
|
Obtained
a loan of ` 5,00,000 from State Bank of India payable after five
years. |
Total
assets increase by 5,00,000 (as cash is coming in). However, since
shareholders' funds remain unchanged, therefore proprietary ratio will
decrease. |
|
Purchased
machinery of ` 2,00,000 by cheque. |
Total
assets are increasing and decreasing by 2,00,000 simultaneously (as cash is
going out and machinery is coming in). Thus, both numerator and
denominator remain unchanged and so proprietary ratio will not change. |
|
Redeemed
7% Redeemable Preference Shares ` 3,00,000. |
Both
shareholders' funds and total assets decrease by 3,00,000 simultaneously and
so proprietary ratio will decrease. |
|
Issued
equity shares to the vendor of building purchased for ` 7,00,000. |
Both
shareholders' funds and total assets increase by 7,00,000 simultaneously and
so proprietary ratio will improve. |
|
Redeemed
10% redeemable debentures of ` 6,00,000 |
Total
assets decrease by 6,00,000 (as cash is going out). However, since
shareholders' funds remain unchanged, therefore proprietary ratio will
improve. |
Page No 4.108:
Question 58:
Calculate Proprietary Ratio, if Total Assets to Debt Ratio is 2: 1. Debt is `5,00,000. Equity Shares Capital is 0.5 times of debt. Preference Shares Capital is 25% of equity share capital. Net profit before tax is `10,00,000 and rate of tax is 40%.
(CBSE Sample Paper 2020)
Answer:
Total Assets to Debt Ratio is 2: 1
Debt = `5,00,000
Total Assets = 10,00,000 (5,00,000×2)
Equity Shares Capital is 0.5 times of debt
Equity
Shares Capital is(0.5×5,00,000)=2,50,000
Preference Shares Capital is 25% of equity share capital
2,50,000×25/100=62,500
Total Share Capital = Equity Shares Capital+ Preference Shares Capital
Total Share Capital = 2,50,000+62,500
Total
Share Capital = 3,12,500
Rate of tax is 40%
Tax is 4,00,000 (40% of 10,00,000)
Surplus (Net Profit after Tax)=10,00,000-4,00,000
Surplus
(Net Profit after Tax)=6,00,000
Share
Holders’ Fund= Total Share Capital+ Surplus
Share Holders’ Fund= 3,12,500+ 6,00,000
Share Holders’ Fund= 3,12,500+ 6,00,000
Share
Holders’ Fund= 9,12,500
Proprietary Ratio= Share Holders’ Fund/Total Assets
Proprietary Ratio= 9,12,500/10,00,000
Proprietary
Ratio 0.912: 1 or 91.2%.
Page No 4.108:
Question 59: From the following information, calculate:
(a) Proprietary Ratio
(b) Debt to Equity Ratio; and
(c) Total Assets to Debt Ratio.
|
Current Assets |
`40,00,000 |
Current Liabilities |
`20,00,000 |
|
Long-term Borrowings |
`15,00,000 |
Long-term Provisions |
`25,00,000 |
|
Non-current Assets |
`40,00,000 |
|
|
Answer:
(a)
Proprietary Ratio
Proprietary
Ratio= Share Holders’ Fund/Total Assets
Proprietary Ratio =20,00,000×100/80,00,000
Proprietary Ratio =25%
(b)
Debt to Equity Ratio
Debt to Equity Ratio= Debt/Equity
Debt to Equity Ratio= 40,00,000/20,00,000
Debt to Equity Ratio= 2/1=2:1
(c)
Total Assets to Debt Ratio
Total Assets to Debt Ratio= Total Assets/Debt
Total Assets to Debt Ratio= 80,00,000/40,00,000
Total Assets to Debt Ratio= 2/1=2:1
Working
Notes:
1. Total Assets=Current Assets+ Non-Current Assets
Total Assets=40,00,000+40,00,000
Total Assets=80,00,000
2. Share holders’ fund= Total Assets - Current Liabilities - Long-term Provisions - Long-term Borrowings
Share holders’ fund=80,00,000-20,00,000-25,00,000-15,00,000
Share holders’ fund=20,00,000
Page No 4.109:
Question 60:
From the following information, calculate:
|
(a) |
Proprietary ratio; |
|
|||
|
(b) |
Debt to equity ratio; and |
|
|||
|
(c) |
Total assets to debts ratio |
|
|||
|
Current Debt Capital employed |
`18,00,000 `15,00,000 |
Current Assets Working Capital |
`7,50,000 `1,50,000 |
|||
Answer;
Proprietary ratio=shareholders’ fund/total asset × 100
Proprietary ratio=3,00,000/21,00,000×100=14.29%
Total asset= capital employed + current liability
21,00,000= 15,00,000 + 6,00,000
Current liability= current assets - working capital
6,00,000= 7,50,000 -1,50,000
Shareholders' fund= capital employed- non-current liabilities
3,00,000= 15,00,000- 12,00,000
Debt = total debts- current liabilities
12,00,000 =18,00,000- 6,00,000
(b) Debt equity ratio
Debt to equity ratio= debt/equity
Debt to equity ratio =12,00,000/3,00,000
Debt to equity ratio =4/1
(c)
Total asset to debt ratio= total asset/ Debt
Total asset to debt ratio=21,00,000/12,00,000
Total asset to debt ratio=1.75:1
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