What will be the new proprietary ratio (0.6:1) of the company if the sale of a fixed asset costing ₹200000 for ₹250000 makes by the company?
Answer & explanation
Correct answer: option 4
The correct answer is option 4- 0.73:1
Proprietary Ratio = Shareholders Funds/Capital employed (or net assets)
Let us assume shareholder's funds are of ₹60000 and assets are ₹100000
Sale of fixed assets increase profit with ₹50000 which increased shareholders funds by ₹50000 and total assets also increased by ₹50000 because cash increased by ₹50000(250000-200000)
So, Proprietary Ratio = 110000/150000
= 0.73:1