45 :- Monica Ltd. Has Quick Ratio of 1.5 : 1. Its Working Capital is Rs 1,20,000 and its inventories are of Rs 80,000. Total Assets of Rs 3,80,000 and Total Debts of Rs 2,80,000.
Calculate Debt to Equity Ratio.
Solution :-
Quick Ratio = Quick Assets/Current Liabilities
1.5 = Current Assets – Inventories/Current Liabilities
1.5 = C.A – 80,000/C.L
1.5 C.L = C.A – 80,000
C.A = 1.5 C.L + 80,000 — Eq 1
Working Capital = Current Assets – Current Liabilities
1,20,000 = C.A – C.L
From Eq 1
1,20,000 = 1.5 C.L + 80,000 – C.L
1,20,000 – 80,000 = 0.5 C.L
40,000/0.5 = C.L
Current Liabilities = Rs 80,000
Debt (Non — Current Liabilities) = Total Debt – Current Liabilities
= 2,80,000 – 80,000
= Rs 2,00,000
Equity (Shareholder’s Funds) = Total Assets – Total Debts
= 3,80,000 – 2,80,000
= Rs 1,00,000
Debt to Equity Ratio = Debt/Equity
= 2,00,000/1,00,000
= 2 : 1