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The following is the balance sheet of a company:

                     Balance Sheet

Equity Share CapitalAmount (Rs.)AssetsAmount (Rs.) 
Equity Share Capital80Plant and Machinery50
Preference Share Capital 20Land and Building40
Reserves11Motor Car15
Debentures15Furniture5
Current liabilities14Stock10
Debtors9
Cash and Bank10
Discount on Issue of Shares1
140140

You are required to calculate 

(a) Debt equity ratio 

(b) Debt ratio 

(c) Proprietary ratio

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The Balance Sheet, for the sake of convenience, can be redrafted as follows: 

Balance Sheet 

Debt Equity Ratio = Long-Term Debt / Equity

= Rs. 15,00,000/Rs. 1,10,00,000 

= 0.136

Debt Ratio = Long-term Debt/Capital Employed

= Rs. 15,00,000/Rs. 1,25,00,000 

= 0.12

Proprietary Ratio = Shareholders Funds/Capital Employed

= Rs. 1,10,00,000/Rs. 1,25,00,000 = 0.88

Alternatively, the debt ratio and proprietary ratio can be based on total assets (Rs. 1,39,00,000),

Then these shall work out as follows:

Debt Ratio = Total Debt/Total Assets

= Rs. 29,00,000/Rs. 1,39,00,000 

= 0.209

Proprietary Ratio = Shareholders Funds/Total Assets 

= Rs. 1,10,00,000/Rs. 1,39,00,000 

 = 0.791

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