Capital gearing ratio = \(\frac{Funds\ bearing\ fixed\ interest\ and\ fixed\ dividend}{Equity\ shareholders'funds}\)
= \(\frac{3,00,000}{4,00,000}\) = 0.75:1
Funds bearing fixed interest and dividend = 6% Preference share capital + 8% Debentures
= 1,00,000 + 2,00,000 = Rs.3,00,000
Equity shareholder’s funds = Equity share capital + General reserve + Surplus
= 2,00,000 + 1,25,000 + 75,000 = Rs.4,00,000

Quick ratio = \(\frac{Quick\ assets}{Current\ liabilities}\) = \(\frac{1,85,000}{1,00,000}\) = 1.85:1
Quick assets = Current assets – Inventories – Prepaid expenses
= 2,50,000 – 50,000 – 15,000
= Rs.1,85,000

Proprietary ratio = \(\frac{Shareholders ' funds}{Total assets}\) = \(\frac{2,00,000}{4,00,000}\) = 0.5:1
Shareholders’ funds = Equity share capital + Preference share capital + Reserves and surplus
= 1,00,000 + 75,000 + 25,000
= Rs. 2,00,000
(iii) Capital gearing ratio
Proprietary ratio gives the proportion of shareholders’ funds to total assets. Proprietary ratio shows the extent to which the total assets have been financed by the shareholders’ funds. It is calculated as follows:
Capital gearing ratio = \(\frac{Funds\ bearing\ fixed\ interest\ or\ fixed\ dividend}{Equity\ shareholders'\ funds}\)

Capital gearing ratio is a measure of long term solvency as well as capital structure. When thecapital gearing ratio is greater than one, the firm is said to be high geared.

Debt equity ratio = \(\frac{Long\ term\ debt}{Shareholders'funds}\) = \(\frac{80,000}{1,60,000}\) = 0.5:1
Long term debt = Debentures = Rs.80,000
Shareholders’ funds = Equity share capital + Reserves and surplus
= 1,00,000 + 60,000 = Rs.1,60,000
(ii) Proprietary ratio
Proprietary ratio gives the proportion of shareholders’ funds to total assets. Proprietary ratio shows the extent to which the total assets have been financed by the shareholders’ funds. It is calculated as follows:
Proprietary ratio = \(\frac{Shareholders'funds}{Total\ assets}\)
Higher the proprietary ratio, greater is the satisfaction for lenders and creditors, as the firm is less dependent on external sources of finance.

(i) Current ratio = \(\frac{Current assets}{Current liabilities}\) = \(\frac{1,50,000}{50,000}\) = 3:1
Current assets = Inventories + Trade receivables + Cash and cash equivalents + Prepaid expenses
= 45,000 + 70,000 + 30,000 + 5,000 = Rs.1,50,000
Current liabilities = Short term borrowings + Trade payables + Expenses payable + Short term provisions
= 17,000 + 25,000 + 3,000 + 5,000 = Rs.50,000
(ii) Quick ratio = \(\frac{Quick assets}{Current liabilities}\) = \(\frac{1,00,000}{50,000}\) = 2:1
Quick assets = Total current assets – Inventories – Prepaid expenses
= 1,50,000 – 45,000 – 5,000 = Rs.1,00,000