Question
From the following particulars compute leverage ratios:
| Liabilities | Rs. | Assets | Rs. |
| Equity Share Capital | 40,000 | Land | 22,000 |
| 8% Preference Share Capital | 20,000 | Building | 24,000 |
| Reserves | 10,000 | Plant and Machinery | 38,000 |
| Profit and Loss Account | 5,000 | Furniture | 5,000 |
| 10% Debentures | 45,000 | Sundry Debtors | 22,000 |
| Trade Creditors | 9,000 | Stock | 13,000 |
| Outstanding Expenses | 2,000 | Cash | 14,000 |
| Provision for Taxation | 3,000 | Prepaid expenses | 2,000 |
| Proposed Dividend | 6,000 | ||
| --- | --- | --- | --- |
| Total | 1,40,000 | Total | 1,40,000 |
Answer :
Word Count : 248
For computing leverage ratios, the main focus is on the relationship between fixed financial charges and the capital structure of the firm. First, the Debt–Equity Ratio is calculated by dividing long-term debt by shareholders’ funds. Long-term debt consists of 10% Debentures amounting to Rs. 45,000. Shareholders’ funds include Equity Share Capital (Rs. 40,000), Preference Share Capital (Rs. 20,000), Reserves (Rs. 10,000), and _____ ___ ____ __________ ___ _____ _______ ____ __________ ____ ________ _______.
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For computing leverage ratios, the main focus is on the relationship between fixed financial charges and the capital structure of the firm. First, the Debt–Equity Ratio is calculated by dividing long-term debt by shareholders’ funds. Long-term debt consists of 10% Debentures amounting to Rs. 45,000. Shareholders’ funds include Equity Share Capital (Rs. 40,000), Preference Share Capital (Rs. 20,000), Reserves (Rs. 10,000), and _____ ___ ____ __________ ___ _____ _______ ____ __________ ____ ________ _______.
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