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Accounting Ratios — Accountancy STD 12 Commerce — Question

CBSE BoardEnglish MediumSTD 12 CommerceAccountancyAccounting Ratios4 Marks
Question
  1. From the following information compute 'Debt-Equity Ratio'.
  ₹
Long term Borrowings 8,00,000
Long term Provisions 4,00,000
Current Liabilities 2,00,000
Non-current Assets 14,40,000
Current Assets 3,60,000
  1. The Quick Ratio of Z Ltd. is 1 : 1. State with reason which of the following transactions would (i) increase; (ii) decrease or (iii) not change the ratio:
  1. Included in the trade payables was a Bills payable of ₹ 3,000 which was met on maturity.
  2. Debentures of ₹ 50,000 were converted into Equity shares.
✓

Answer

  1. $\text{Debt Equity ratio}=\frac{\text{Debt}}{\text{ Equity}}$
Debt = Long term borrowings + Long term provisions = ₹ 8,00,000 + 4,00,000 = 12,00,000

Equity = Current Assets + Non Current Assets – Debt – Current Liabilities

= 3,60,000 + 14,40,000 – 12,00,000 – 2,00,000 = ₹ 4,00,000

$\text{Debt Equity ratio} =\frac{12,00,000}{4,00,000}=3:1$
  1.  
  CHANGE   REASON
1 No Change : Both Current Assets and Current Liabilities are decreasing with same amount.
2 No Change : Neither Current Assets nor Current Liabilities are changing.

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