Question:medium

From the following information obtained from the books of KVK Ltd., calculate Net Assets Turnover Ratio and Debt Equity Ratio:

Information Table

Information Amount (₹)
Preference Share Capital8,00,000
Equity Share Capital12,00,000
General Reserve2,00,000
Balance in Statement of Profit and Loss6,00,000
15% Debentures4,00,000
12% Loan4,00,000
Revenue from Operations72,00,000

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Debt Equity Ratio helps assess risk; Net Asset Turnover shows efficiency of asset utilization.
Updated On: Jan 16, 2026
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Solution and Explanation

  • Net Assets Calculation: Equity Share Capital (12,00,000) + Reserves (2,00,000) + Surplus (6,00,000) + Preference Share Capital (8,00,000) = 28,00,000
  • Net Assets Turnover Ratio Calculation: Revenue from Operations (72,00,000) / Net Assets (28,00,000) = 2.57 times
  • Debt Calculation: Debentures (4,00,000) + Loan (4,00,000) = 8,00,000
  • Equity Calculation: Equity Share Capital (12,00,000) + Reserves (2,00,000) + Surplus (6,00,000) = 20,00,000
  • Debt Equity Ratio Calculation: Debt (8,00,000) / Equity (20,00,000) = 0.4 : 1
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