Question

HQ. 38. Calculate Total Assets to Debt Ratio from the following:
capital employed 6000000
share capital 2000000
reserve and surplus 1600000 trade payable 800000 outstanding expense 40000 ​

Answer 1

Explanation:

Answer:

total assets ÷ Debt equity

total assets = capital employed

- Trade payable - outstanding expenses

or

total assets = 6000000-2000000

-1600000

= 2400000

Debt ratio = share capital

+ Reserve and surplus

or

debt ratio = 800000+40000

total assets ÷ debt ratio

or

2400000÷ 840000 = 2.85

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Answer 2

Given: capital employed=  6000000

           share capital = 2000000

           reserve and surplus = 1600000

           trade payable = 800000

           outstanding expense = 40000 ​

To Find: Total Assets to Debt Ratio

Explanation:

Current Liability = Trade Payable + Outstanding Expense

                           = 8,00,000 + 40,000

                           = 8,40,000

Total Assets = Capital Employed + Current Liabilities

                     = 60,00,000 +  8,40,000

                     = 68,40,000

Capital Employed = Share capital + Reserve & Surplus - Long Term Debt

   60,00,000   =  20,00,000   +   16,00,000   +  Long Term Debt

   Long Term Debt    =   24,00,000

Total Assets to Debt Ratio =  $\frac{Total Assets}{Long term Debt}$

                                               = $\frac{68,40,000}{24,00,000}$

    Total Assets to Debt Ratio = 57 : 20  or  2.85 : 1