From the information given below, calculate (i) Current Ratio and (ii) Debt to Equity Ratio:

Information: Net profit of the year₹80,000; Fixed Assets₹2,00,000; Closing Inventory *10,000; Other Current Assets ₹ 1,00,000; Current Liabilities₹30,000; Equity Share Capital ₹1,00,000; 10% Preference Share Capital₹70,000; 12% Debentures₹60,000 and Revenue from Operations, i.e., Net Sales during the year 5,00,000.

To calculate the **Current Ratio** and **Debt to Equity Ratio**, we need to use the appropriate formulas and understand which elements from the provided information relate to each ratio.

### (i) **Current Ratio**
The **Current Ratio** is a measure of a company's ability to pay off its short-term liabilities with its short-term assets. The formula is:

\[
\text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}}
\]

- **Current Assets** include closing inventory and other current assets, which are provided as:
  - Closing Inventory = ₹10,000
  - Other Current Assets = ₹1,00,000
  - So, Total Current Assets = ₹10,000 + ₹1,00,000 = ₹1,10,000

- **Current Liabilities** are given as ₹30,000.

Now, applying the values in the formula:

\[
\text{Current Ratio} = \frac{1,10,000}{30,000} = 3.67
\]

So, the **Current Ratio** is **3.67**.

---

### (ii) **Debt to Equity Ratio**
The **Debt to Equity Ratio** is a measure of a company's financial leverage. It compares the total liabilities (debt) to shareholders' equity. The formula is:

\[
\text{Debt to Equity Ratio} = \frac{\text{Total Debt}}{\text{Shareholders' Equity}}
\]

- **Total Debt** includes debentures and preference share capital:
  - Debentures = ₹60,000
  - Preference Share Capital = ₹70,000
  - So, Total Debt = ₹60,000 + ₹70,000 = ₹1,30,000

- **Shareholders' Equity** includes equity share capital:
  - Equity Share Capital = ₹1,00,000

Now, applying the values in the formula:

\[
\text{Debt to Equity Ratio} = \frac{1,30,000}{1,00,000} = 1.3
\]

So, the **Debt to Equity Ratio** is **1.3**.

### Final Answers:
1. **Current Ratio** = 3.67
2. **Debt to Equity Ratio** = 1.3

Let me know if you'd like further details or clarifications!

#### Expansion Questions:
1. How does the current ratio affect a company's short-term financial health?
2. What is a good or bad debt to equity ratio for a company?
3. How would an increase in current liabilities impact the current ratio?
4. What role does preference share capital play in debt calculation?
5. How would you interpret a debt to equity ratio greater than 2?

#### Tip:
A higher current ratio typically indicates better liquidity, but an excessively high ratio may suggest inefficiency in using current assets.

From the information given below, calculate (i) Current Ratio and (ii) Debt to Equity Ratio:

Information: Net profit of the year ₹80,000; Fixed Assets ₹2,00,000; Closing Inventory ₹10,000; Other Current Assets ₹1,00,000; Current Liabilities ₹30,000; Equity Share Capital ₹1,00,000; 10% Preference Share Capital ₹70,000; 12% Debentures ₹60,000 and Revenue from Operations, i.e., Net Sales during the year ₹5,00,000.

This page provides a step-by-step guide to calculating the Current Ratio (3.67) and Debt to Equity Ratio (1.3) from a company's financial data, including current assets, current liabilities, equity share capital, debentures, and preference share capital. Suitable for undergraduate finance or accounting students.

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