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Question
Total Debt ₹12,00,000; Shareholders' Funds ₹2,00,000; Reserves and Surplus ₹50,000; Current Assets ₹5,00,000; Working Capital ₹1,00,000. Calculate Total Assets to Debt Ratio.
Solution
Working Capital=Current Assets−Current Liabilities
1,00,000=5,00,000−Current Liabilities
Current Liabilities=Rs 4,00,000
Debt=Total Debt−Current Liabilities
=12,00,000 - 4,00,000 = Rs 8,00,000
Total Assets=Shareholders' Funds+ Total Debt
=2,00,000+12,00,000=Rs 14,00,000
Total Assets to Debt Ratio
= `"Total Assets"/"Debt" = 1400000/800000 = 1.75 : 1`
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