[CBSE] Q. 77,78,79,80 Solution of Accounting Ratios TS Grewal Class 12 (2026-27)
Solution of Question 77, 78, 79, 80 Accounting Ratios of TS Grewal Book 2026-27 session CBSE Board
Q. 77. Calculate Debt to Capital Employed Ratio from the following information:
Debt to Equity Ratio 2 : 1; Long-term Borrowings ₹ 18,00,000; Long-term Provision ₹ 6,00,000; Reserves and Surplus ₹ 2,00,000.
[Ans.: 0.67 : 1.]
Solution:-
Q. 78. Debt to Capital Employed Ratio of a Company is 0.4 : 1. State giving reasons, which of the following will improve, reduce or not change the ratio?
(i) Sale of Machinery at a loss of ₹ 50,000.
(ii) Purchase of Stock-in-Trade on Credit of two months for ₹ 80,000.
(iii) Conversion of Debentures into Equity Shares of ₹ 5,00,000.
(iv) Purchase of Fixed Assets for ₹ 4,00,000 on a long term deferred payment basis.
[Ans.: (i) Improve, (ii) Not Change, (iii) Reduce, (iv) Improve.]
Solution:-
(i) Sale of Machinery at a loss of ₹ 50,000.
Let’s analyze the impact of selling machinery at a loss of ₹ 50,000 on the debt-to-capital employed ratio
Debt-to-Capital Employed Ratio Formula
Debt-to-Capital Employed Ratio
= Long-Term Debt\Capital Employed
Long-Term Debt = ₹ 80,000
Capital Employed:- ₹ 2,00,000 Includes shareholders’ funds and long-term liabilities (total equity + total debt).
= 80,000/2,00,000 = 0.4 : 1
Impact of Selling Machinery
1. Loss of ₹ 50,000:-
- A loss of ₹ 50,000 reduces shareholders’ funds (reserves or retained earnings), which are part of capital employed.
- The long-term debt remains unchanged.
- Revised Values
- Initial Capital Employed: ₹ 2,00,000
- Reduction in Shareholders’ Funds: ₹ 50,000
- Revised Capital Employed: 2,00,000 – 50,000 = ₹ 1,50,000
1. Recalculate Debt-to-Capital Employed Ratio:
Debt-to-Capital Employed Ratio
= Long-Term Debt\Capital Employed
= 80,000/1,50,000 = 0.533 : 1 (approx.)
Impact
The debt-to-capital employed ratio Improves from 0.4 : 1 (before the sale) to approximately 0.533 : 1, reflecting higher reliance on debt compared to capital employed.
(ii) Purchase of Stock-in-Trade on Credit of two months for ₹ 80,000.
If we consider debt only as long-term liabilities, the purchase of stock-in-trade on credit for two months typically does not directly impact the debt-to-capital employed ratio. Here’s the reasoning:
Debt-to-Capital Employed Ratio Formula:
= Long-Term Debt\Capital Employed
- Long-Term Debt: ₹ 1,20,000
- Capital Employed: ₹ 3,00,000 (includes shareholders’ equity and long-term debt)
= 1,20,000/3,00,000 = 0.4 : 1
Impact of the Transaction:
1. Credit Purchase:
The purchase of stock-in-trade on credit creates current liabilities (accounts payable), which are not part of long-term debt.
Therefore, long-term debt remains unchanged.
2. Capital Employed Unaffected:
- Since the transaction does not impact long-term liabilities or shareholders’ funds, Capital employed remains unchanged.
Final Impact:
- With long-term debt and capital employed staying constant, the debt-to-capital employed ratio remains unchanged at:
Debt-to-Capital Employed Ratio
= 1,20,000/3,00,000} = 0.4 : 1
(iii) Conversion of Debentures into Equity Shares of ₹ 5,00,000.
The conversion of ₹ 5,00,000 worth of debentures into equity shares will reduce the debt-to-capital employed ratio, and here’s why:
Debt-to-Capital Employed Ratio Formula:
Debt-to-Capital Employed Ratio
= Long-Term Debt\Capital Employed
- Initial Values:
- Long-Term Debt (before conversion): ₹ 6,00,000
- Capital Employed (before conversion): ₹ 15,00,000
- Debt-to-Capital Employed Ratio: = 6,00,000/15,00,000} = 0.4 : 1
1. Impact of Conversion:
- Converting debentures (a long-term liability) into equity reduces long-term debt by ₹ 5,00,000, leaving: 6,00,000 – 5,00,000 = ₹ 1,00,000
- The same amount is added to shareholders’ equity, but capital employed (the sum of long-term debt and shareholders’ funds) remains unchanged at ₹ 15,00,000.
2. Revised Values:
- Long-Term Debt (after conversion): ₹ 1,00,000
- Capital Employed (unchanged): ₹ 15,00,000
New Debt-to-Capital Employed Ratio:
Debt-to-Capital Employed Ratio
= 1,00,000/15,00,000 = 0.067 : 1 (approx)
Impact:
- The ratio decreases from 0.4 : 1 to approximately 0.067 : 1, indicating a significantly lower reliance on debt compared to total capital employed.
(iv) Purchase of Fixed Assets for ₹ 4,00,000 on a long term deferred payment basis.
The purchase of fixed assets for ₹ 4,00,000 on a long-term deferred payment basis will impact the debt-to-capital employed ratio as follows:
Debt-to-Capital Employed Ratio Formula:
Debt-to-Capital Employed Ratio = Long-Term Debt\Capital Employed
1. Initial Values:
- Long-Term Debt (before transaction): ₹ 6,00,000
- Capital Employed (before transaction): ₹ 15,00,000
- Debt-to-Capital Employed Ratio:
= 6,00,000/15,00,000} = 0.4 : 1
2. Impact of the Transaction:
- Since the fixed assets are purchased on a long-term deferred payment basis, the long-term debt increases by ₹ 4,00,000.
- The new long-term debt becomes: = 6,00,000 + 4,00,000 = ₹ 10,00,000
- Capital Employed also increases because long-term debt is included in capital employed. The new capital employed becomes: = 15,00,000 + 4,00,000 = ₹ 19,00,000
3. Revised Debt-to-Capital Employed Ratio:
Debt-to-Capital Employed Ratio
= Long-Term Debt\Capital Employed
= 10,00,000/19,00,000 = 0.526 : 1 (approx.)
Impact:
- The debt-to-capital employed ratio improves from 0.4 : 1 to approximately 0.526 : 1, reflecting higher reliance on debt compared to capital employed.
Q. 79. From the following details, Calculate Inventory Turnover Ratio:
| Cost of Revenue from Operations (Cost of Goods Sold) | ₹ 9,00,000 |
| Inventory in the beginning of the year | ₹ 2,50,000 |
| Inventory at the close of the year | ₹ 3,50,000 |
[Ans.: Inventory Turnover Ratio = 3 Times.]
Solution:-
Q. 80. Cost of Revenue from Operations (Cost of Goods Sold) ₹ 5,00,000; Purchases ₹ 5,50,000; Opening Inventory ₹ 1,00,000.
Calculate Inventory Turnover Ratio.
[Ans.: Inventory Turnover Ratio = 4 Times.]
[Hint: Closing Inventory = Opening Inventory + Purchases – Cost of Revenue from Operations (Cost of Goods Sold).]
Solution:-
