12th2025-2026

On the basis of the following information calculate:

(i) Debt to Equity Ratio; and 
(ii) Working Capital Turnover Ratio.

Information:		₹			₹
Revenue from Operations:	(a) Cash Sales	40,00,000		Paid-up Share Capital	17,00,000
	(b) Credit Sales	20,00,000		6% Debentures	3,00,000
Cost of Goods Sold		35,00,000		9% Loan from Bank	7,00,000
Other Current Assets		8,00,000		Debentures Redemption Reserve	3,00,000
Current Liabilities		4,00,000		Closing Inventory	1,00,000

Answer:

(i)

Long-term Debts = 6% Debentures + 9% Loan from Bank

= 3,00,000 + 7,00,000 = 10,00,000

Equity = Paid-up Share Capital + Debenture Redemption Reserve

= 17,00,000 + 3,00,000 = 20,00,000

Debts-Equity Ratio= Long-term Debts/ Equity

                             =10,00,000/20,00,000

                             =0.5:1

(ii)

Current Assets = Other Current Assets + Inventory

= 8,00,000 + 1,00,000

= 9,00,000

Working Capital = Current Assets − Current Liabilities

= 9,00,000 − 4,00,000

= 5,00,000

Net Sales = Cash Sales + Credit sales

= 40,00,000 + 20,00,000

= 60,00,000

Working Capital tunover Ratio=Net Sales/Working Capital

                                      =60,00,000/5,00,000

                                      = 12 Times

From the following, calculate (a) Debt to Equity Ratio; (b) Total Assets to Debt Ratio; and (c) Proprietary Ratio:

Equity Share Capital	₹75,000		Debentures	₹75,000
Preference Share Capital	₹25,000		Trade Payable	₹40,000
General Reserve	₹45,000		Outstanding Expenses	₹10,000
Balance in Statement of Profit and Loss	₹30,000

Answer:

(a)

Debt to Equity Ratio=Long term Debts/Shareholders' Funds

Debt to Equity Ratio=Debentures

Equity=Share Capital+Preference Share Capital+General Reserve+Balance in Statement of Profit & Losss

Debt to Equity Ratio=75,000/75,000+25,000+45,000+30,000=0.43:1

(b)

Total Assets to Debt Ratio=Total Assets/Long term Debts

Total Assets to Debt Ratio=Equity Share Capital+Preference Share Capital+General Reserve+Balance in Statement of Profit & Loss/Debentures+Trade Payables+Outstanding ExpensesDebentures

Total Assets to Debt Ratio=75,000+25,000+45,000+30,000+75,000+40,000+10,000/75,000

 =4:1

(c)

Proprietary Ratio=Shareholders' Funds/Total Assets

Proprietary Ratio=Equity Share Capital+Preference Share Capital+General Reserve+Balance in Statement of Profit & Loss

Equity Share Capital+Preference Share Capital+General Reserve+Balance in Statement of Profit & Loss+Debentures+Trade Payables+Outstanding Expenses

Proprietary Ratio=75,000+25,000+45,000+30,000/75,000+25,000+45,000+30,000+75,000+40,000+10,000

 =0.58:1 or 58.33%

From the following information related to Naveen Ltd., calculate (a) Return on Investment and (b) Total Assets to Debt Ratio:
 Information: Fixed Assets ₹75,00,000; Current Assets ₹40,00,000; Current Liabilities ₹27,00,000; 12% Debentures ₹80,00,000 and Net Profit before Interest, Tax and Dividend ₹14,50,000.

 Answer:

 1) Return on Investment

 Return on Investment = Net profitBefore Interest, Tax and dividend ×100/ Capital Employed

 Net profitBefore Interest, Tax and dividend=14,50,000
 Capital employed= Fixed Assets + Current Assets+ Current Liabilities
                             =75,00,000+40,00,000+27,00,000

                             =88,00,000

 Return on Investment =14,50,000×100/88,00,000

                             =16.48%

 2) Total Assets to Debt to Ratio
 Total Assets to Debt Ratio = Total Assets/Debt

Total Assets = Fixed Assets + Current Assets 

= ₹(75,00,000 + 40,00,000) 

= ₹1,15,00,000

Debt = ₹80,00,000

Total Assets to Debt Ratio = 1,15,00,000/80,00,000 

= 1.44:1

 

From the following information, calculate:

(i) Gross Profit Ratio;

(ii) Working Capital Turnover Ratio; and

(iii) Proprietary Ratio.

Particulars	Rs.	Particulars	Rs.
Paid-up Capital	8,00,000	Current Assets	5,00,000
Credit Sales	3,00,000	Current Liabilities	2,90,000
9% Debentures	3,40,000	Cash Sales: 75% of Credit Sales
Cost of Goods Sold	6,80,000	Net Profit for the year	1,55,000

 

Answer:

(i) Gross Profit Ratio

 

Gross Profit Ratio = Gross Profit Ratio×100/Revenue from Operations

Gross Profit Ratio = -1,55,000×100/5,25,000

Gross Profit Ratio = -29.52%

 

Working Notes:

Gross Profit = Revenue form operation - Cost of Goods Sold

-1,55,000 = 5,25,000- 6,80,000

 

Revenue form operation = Credit Sales+ Cash Sales: 75% of Credit Sales

Revenue form operation = 3,00,000 + 2,25,000=5,25,000

 

(ii) Working Capital Turnover Ratio

Working Capital Turnover Ratio = Revenue from Operations/Working Capital

Working Capital Turnover Ratio = 5,25,000/Working Capital

Working Capital Turnover Ratio = 5,25,000/2,10,000= 2.5 Times

Working Notes:

Working Capital = Current Assets + Current Liabilities

Working Capital = 5,00,000 + 2,90,000 = 2,10,000

(iii) Proprietary Ratio

 

Proprietary Ratio = Proprietary’s fund×100/ Total Assets

Proprietary Ratio = 9,55,000×100/15,85,000

Proprietary Ratio = 60.25%

 

Working Notes:

Proprietary’s fund = Paid-up Capital + Net Profit for the year

Proprietary’s fund = 8,00,000+1,55,000=9,55,000

Total Assets = Total Liabilities

Total Assets = Paid-up Capital+9% Debentures+ Net Profit for the years+Current Liabilities

Total Assets = 8,00,000 + 3,40,000+1,55,000+2,90,000

Total Assets = 15,85,000