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: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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