Bunye Limited has the following balances in the statement of financial position at 31 December 2021.
$$\begin{array}{l}
\begin{array} {lll }
&£\
\text {Praperty, plant and equipment}&423,000\
\text {Trade payables}&88,000\
\text {Retained earnings}&186,000\
\text {Earrawings (all nan-current liabilities)}&150,000\
\text {Inentory}&29,000\
\text {bank overdraft}&4,200\
\text {Trade and ather receivables}&57,500\
\text {Taxation payable}&18,800\
\text {Nan-current asset irvestments}&22,500\
\text {share iapital}&35,000\
\text {Share premium}&50,000\
\end{array}
\end{array}$$ Based on the above figures, what is the debt ratio?

Question

Bunye Limited has the following balances in the statement of financial position at 31 December 2021.
$$\begin{array}{l}
\begin{array} {lll } 
&£\
\text {Praperty, plant and equipment}&423,000\
\text {Trade payables}&88,000\
\text {Retained earnings}&186,000\
\text {Earrawings (all nan-current liabilities)}&150,000\
\text {Inentory}&29,000\
\text {bank overdraft}&4,200\
\text {Trade and ather receivables}&57,500\
\text {Taxation payable}&18,800\
\text {Nan-current asset irvestments}&22,500\
\text {share iapital}&35,000\
\text {Share premium}&50,000\
\end{array}
\end{array}$$ Based on the above figures, what is the debt ratio?

Quizplus · Accepted Answer

The debt ratio is calculated as total liabilities divided by total assets. Total liabilities include trade payables, bank overdraft, taxation payable, and borrowings (earrawings). Total assets include property, plant and equipment, inventory, trade and other receivables, non-current asset investments, and possibly cash (not directly mentioned but implied by bank overdraft). The calculation is as follows:Total Liabilities = £88,000 (Trade payables) + £4,200 (Bank overdraft) + £18,800 (Taxation payable) + £150,000 (Borrowings) = £261,000.Total Assets = £423,000 (Property, plant, and equipment) + £29,000 (Inventory) + £57,500 (Trade and other receivables) + £22,500 (Non-current asset investments) + £4,200 (Bank overdraft as a negative cash balance) = £536,200.Debt Ratio = Total Liabilities / Total Assets = £261,000 / £536,200 ≈ 0.49.

Bunye Limited Has the Following Balances in the Statement of Financial