Question
From the following information, calculate Total Assets to Debt Ratio:
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Answer
Total Assets to Debt Ratio $=\frac{\text{Total Assets}}{\text{Long term Debts}}$
Long Term Debts = 8% Debentures + Loan from Bank.
= ₹ 30,00,000 + ₹ 10,00,000 = ₹ 40,00,000
Total Assets = Shareholder's Funds (i.e., Share Capital + Reserve and Surplus) + Total Debts (i.e., 8% Debentures + Loan from Bank + Short term Borrowings).
= ₹ 20,00,000 + ₹ 5,00,000 + ₹ 30,00,000 + ₹ 10,00,000 + ₹ 8,60,000 = ₹ 73,60,000
Total Assets to Debt Ratio $=\frac{73,60,000}{40,00,000}=1.84:1$
Note: Surplus i.e., Balance in Statement of Profit & Loss will be ignored since it is already included in Reserve and Surplus.
Long Term Debts = 8% Debentures + Loan from Bank.
= ₹ 30,00,000 + ₹ 10,00,000 = ₹ 40,00,000
Total Assets = Shareholder's Funds (i.e., Share Capital + Reserve and Surplus) + Total Debts (i.e., 8% Debentures + Loan from Bank + Short term Borrowings).
= ₹ 20,00,000 + ₹ 5,00,000 + ₹ 30,00,000 + ₹ 10,00,000 + ₹ 8,60,000 = ₹ 73,60,000
Total Assets to Debt Ratio $=\frac{73,60,000}{40,00,000}=1.84:1$
Note: Surplus i.e., Balance in Statement of Profit & Loss will be ignored since it is already included in Reserve and Surplus.
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