Q.From the illustrative data in Section 1 (Shareholders' Funds ₹8,00,000, 10% Debentures ₹4,00,000, Total Assets ₹14,00,000), calculate the Debt-Equity Ratio, the Total Assets to Debt Ratio, and the Proprietary Ratio.

All three ratios reuse the same three figures — Shareholders' Funds, Long-term Debt, and Total Assets — just paired differently to reveal three different angles on the firm's financing structure.

Step 1 — Debt-Equity Ratio.

Debt-Equity Ratio = Long-term Debt ÷ Shareholders' Funds = 4,00,000 ÷ 8,00,000 = 0.5 : 1.

Step 2 — Total Assets to Debt Ratio.

Total Assets to Debt Ratio = Total Assets ÷ Long-term Debt = 14,00,000 ÷ 4,00,000 = 3.5 : 1.

Step 3 — Proprietary Ratio.

Proprietary Ratio = Shareholders' Funds ÷ Total Assets = 8,00,000 ÷ 14,00,000 = 0.5714... ≈ 0.57 : 1 (about 57%).

Interpretation: A Debt-Equity Ratio of only 0.5:1 shows the firm uses ₹0.50 of long-term debt for every ₹1 of owners' funds — a moderate, conservative reliance on borrowing. The Total Assets to Debt Ratio of 3.5:1 shows long-term debt is backed by ample total assets, giving lenders a comfortable cushion. The Proprietary Ratio of about 57% shows a little over half the firm's total assets are financed by shareholders' own funds, with the rema …

As a cross-check, the Proprietary Ratio plus the proportion of total assets financed by long-term debt and current liabilities should together account for 100% of Total Assets: 57.14% (proprietary) + 28.57% (long-term debt/t …

Students sometimes use TOTAL Liabilities (long-term debt PLUS current liabilities) instead of only LONG-TERM Debt in the Debt-Equity Ratio and the Total Assets to Debt Ratio — both ratios specifical …