Proprietor’s fund refers to total investment made by owner(s) of a business enterprise. In other words, it indicates the value of total assets of a business enterprise after deducting its long and short terms liabilities.
Formula for calculating proprietor’s fund:
It can be calculated by using below given formulas:
Total Assets – Total Liabilities
(Here total liabilities include only long and short term liabilities.)
Equity + Preference share capital + Reserves & Surplus.
After going through the above given formulas, it is clear that proprietor’s fund is nothing more than the amount of capital invested by owner(s) of a business firm.
Proprietor’s fund is used to calculate proprietary ratio. This ratio helps in measuring the proportion of owner’s fund in relation to the total assets of business. Here total assets include both owner’s fund and outsider’s fund.
Formula for proprietary ratio:
Proprietary ratio is calculated by below mentioned formula:
Proprietary ratio = Proprietor’s fund / Total assets.