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12th | Accounting Ratio | Question No. 61 To 65 | Ts Grewal Solution 2023-2024

Question 61:


From the following information, calculate Proprietary Ratio:

 

 `

Equity Share Capital

3,00,000

Preference Share Capital

1,50,000

Reserves and Surplus

75,000

Debentures

1,80,000

Trade Payables

45,000

 

7,50,000

Fixed Assets

3,75,000

Short-term Investments

2,25,000

Other Current Assets

1,50,000

 

7,50,000

 

 

Answer:

Proprietary Ratio= Shareholders’ fund/Total Assets

Proprietary Ratio= 5,25,000×100/7,50,000=70%

Total Assets = Fixed Assets + Current Assets + Investments

Total Assets = 3,75,000 + 1,50,000 + 2,25,000 = 7,50,000

Shareholders’ Funds = Equity Share Capital + Preference Share Capital + Reserves and Surplus

= 3,00,000 + 1,50,000 + 75,000 = 5,25,000

Question 62:

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

Question 63:

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%.

 

Question 64:

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.

Calculation of Debt to Equity Ratio, Proprietary Ratio, and Total Assets to Debt Ratio

Question 65:

 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

 

Ts Grewal Solution 2023-2024

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Class 12 / Volume – I

Chapter 3 – Accounting Ratio

Question No. 1 To 5

Question No. 6 To 10

Question No. 11 To 15

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Question No. 21 To 25

Question No. 26 To 30

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