Question

What is the formula of Net Capital Ratio?

• A. Current assets Current Liabilities
• B. Total expenses Gross income
• C. Total assets Total liabilities
• D. Fixed expenses Gross income

Hint:

Net capital ratio is calculated as total assets divided by total liabilities.

Answer 1

The Correct Option is C

Concept:
Net capital ratio is used in farm financial analysis to study the solvency position of a farm business.

Step 1: Understand the meaning.
Net capital ratio compares total assets with total liabilities.

Step 2: Write the formula. \[ \text{Net Capital Ratio}=\frac{\text{Total Assets}}{\text{Total Liabilities}} \]

Step 3: Interpret the formula.
A higher ratio indicates that the farm has more assets in comparison to its liabilities. Therefore, the formula is: \[ \frac{\text{Total assets}}{\text{Total liabilities}} \] \[ \therefore \text{Correct Answer is (C)} \]