Question

Calculate Capital Gearing Ratio

Refer the following summarized Balance Sheet & P&L of AB Ltd. as on 31 ‐ 3 ‐ 2022.   Summarized Profit and Loss Account is as under for the year ending on 31 ‐ 3 ‐ '04:                                                                                      Rs. Sales (25% Cash sales)                                              80,00,000 Less: Cost of goods sold                                            56,00,000        Gross Profit                                                                24,00,000        Net profit (Before interest and tax 50%)                     9,00,000 Calculate the following ratios:
A 0.54 Correct Answer Incorrect Answer
B 0.50 Correct Answer Incorrect Answer
C 0.45 Correct Answer Incorrect Answer
D 0.34 Correct Answer Incorrect Answer
E 0.60 Correct Answer Incorrect Answer

Solution

Capital Gearing Ratio = Fixed Interest or Dividend Securities / Equity Shareholders Fund = 9,00,000 / 16,80,000 = 0.54 FIS = Debentures + Preference share capital           ESHF = Eq. Sh. Cap. + Reserves & Surplus – Fictitious Assets       LTL = 9,00,000 ESHF = 10,00,000 + 7,00,000 ‐ 20,000 = 16,80,000

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