Additional Accounting Ratios
(Included in CBSE Syllabus 2022-23 for Class-XII)
1. Debt to Capital Employed Ratio
The Debt to capital employed ratio refers to the ratio of long-term debt to the total of external and
internal funds (capital employed or net assets).
It is computed as follows:
Long-term Debt
Debt to Capital Employed Ratio =
Capital Employed or Net Assets
Notes:
Capital employed = Shareholders’ funds + Long-term debts (or Non-current liabilities)
Alternatively, Capital employed = Net assets = Total assets – Current liabilities
or = Non-current assets + Net working capital
Significance: Like debt-equity ratio, it shows proportion of long-term debts in capital employed. Low
ratio provides security to lenders and high ratio helps management in trading on equity.
Illustration 1: From the following balance sheet of ABC Co. Ltd. as on March 31, 2022, calculate
Debt to Capital Employed Ratio:
ABC Co. Ltd.
Balance Sheet as at 31 March, 2022
(Included in CBSE Syllabus 2022-23 for Class-XII)
1. Debt to Capital Employed Ratio
The Debt to capital employed ratio refers to the ratio of long-term debt to the total of external and
internal funds (capital employed or net assets).
It is computed as follows:
Long-term Debt
Debt to Capital Employed Ratio =
Capital Employed or Net Assets
Notes:
Capital employed = Shareholders’ funds + Long-term debts (or Non-current liabilities)
Alternatively, Capital employed = Net assets = Total assets – Current liabilities
or = Non-current assets + Net working capital
Significance: Like debt-equity ratio, it shows proportion of long-term debts in capital employed. Low
ratio provides security to lenders and high ratio helps management in trading on equity.
Illustration 1: From the following balance sheet of ABC Co. Ltd. as on March 31, 2022, calculate
Debt to Capital Employed Ratio:
ABC Co. Ltd.
Balance Sheet as at 31 March, 2022
