Question
From the following ascertain Debt - Equity Ratio:
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Answer
Debt - Equity Ratio $=\frac{\text{Debt}}{\text{Equity}}\text{ or }\frac{\text{Long term Debts}}{\text{Shareholder's Funds}}$
Long term Debts = 8% Debentures + 10% Long term Loan + Long term Provision.
= ₹ 5,00,000 + ₹ 3,40,000 = ₹ 1,12,000
= ₹ 9,52,000
Shareholder's Funds = Share Capital + Capital Reserve + General Reserve + Profit & Loss Balance.
= ₹ 6,00,000 + ₹ 3,20,000 + ₹ 60,000 + ₹ 1,40,000
= ₹ 11,20,000
Debt Equity Ratio $=\frac{₹\ 9,52,000}{₹\ 11,20,000}=0.85:1.$
Long term Debts = 8% Debentures + 10% Long term Loan + Long term Provision.
= ₹ 5,00,000 + ₹ 3,40,000 = ₹ 1,12,000
= ₹ 9,52,000
Shareholder's Funds = Share Capital + Capital Reserve + General Reserve + Profit & Loss Balance.
= ₹ 6,00,000 + ₹ 3,20,000 + ₹ 60,000 + ₹ 1,40,000
= ₹ 11,20,000
Debt Equity Ratio $=\frac{₹\ 9,52,000}{₹\ 11,20,000}=0.85:1.$
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