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, 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 63:
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 64:
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
Question 65:
From the following information, calculate:
|
(a) |
Proprietary
ratio; |
|
|||
|
(b) |
Debt
to equity ratio; and |
|
|||
|
(c) |
Total
assets to debts ratio |
|
|||
|
Total 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
Ts Grewal Solution 2025-2026
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Class 12 / Volume – III
Chapter 4 – Accounting Ratios