Question
Calculate the Debt Equity Ratio from the following:-
✓
Answer
Debt - Equity Ratio $=\frac{\text{Debt}}{\text{Equity}}\text{ or }\frac{\text{Long term Debts}}{\text{Shareholder's Funds}}$
Long term Debts = Long term Borrowings + Long term Provisions (i.e. Provision for Employee Benefits).
= ₹ 2,00,000 + ₹ 60,000 = ₹ 2,60,000
Shareholder's Funds = Equity Share Capital + Preference Share Capital + Reserves - Profit & Loss Balance
= ₹ 3,00,000 + ₹ 50,000 + ₹ 1,60,000 - ₹ 50,000
= ₹ 4,60,000
Debt Equity Ratio $=\frac{₹\ 2,60,000}{₹\ 4,60,000}=0.57:1.$
Long term Debts = Long term Borrowings + Long term Provisions (i.e. Provision for Employee Benefits).
= ₹ 2,00,000 + ₹ 60,000 = ₹ 2,60,000
Shareholder's Funds = Equity Share Capital + Preference Share Capital + Reserves - Profit & Loss Balance
= ₹ 3,00,000 + ₹ 50,000 + ₹ 1,60,000 - ₹ 50,000
= ₹ 4,60,000
Debt Equity Ratio $=\frac{₹\ 2,60,000}{₹\ 4,60,000}=0.57:1.$
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