from the following you are reuired to comment upon the long-termas well as short

Question

from the following you are reuired to comment upon the long-termas well as short-term solvency of the company .

Liabilities                         Rs                                Assets                               Rs

Sharecpital                    5,00,000                       fixedassets                       6,00,000

Fixedliabilities          2,50,000                      liquidassets                            3, 00,000

Current liabilities        2,50,000                     stock intrade                           1, 00,000

TOTAL                     10,00,000                     TOTAL                                    10,00,000

HINT: calculate debt-equity ratio, fixed assets ratio,proprietary ratio. Current ratio and liquidity ratio.

Explanation / Answer

1 Debt equityratio    = Total Debt /Equity           = (250,000 + 250,000) / 500,000           = 1 2 Fixed Assets Ratio = Long-term funds / Net fixedassets           = 5,00,000 + 2,50,000 /6,00,000           = 1.25 3 Proprietory Ratio  = Properitors' Fund / TotalAssets           = 5,00,000 / 6,00,000 + 3,00,000 + 1,00,000           = 0.5 4 Current Ratio     = Current assets / CurrentLiabilities           = 3,00,000 + 1,00,000 / 2,50,000           = 1.6 5 Liquidity ratio    = Liquid assets / Currentliabilities         = 3,00,000 / 2,50,000         = 1.2

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