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Accounting Ratios — Accountancy STD 12 Commerce — Question

CBSE BoardEnglish MediumSTD 12 CommerceAccountancyAccounting Ratios3 Marks
Question
Total Assets ₹ 12,50,000; Total Debts ₹ 10,00,000; Current Liabilities ₹ 5,00,000. Calculate Debt to Equity Ratio.
Hints:
  1. Long-term Debts = Total Debts - Current Liabilities.
  2. Shareholders' Funds = Total Assets - Total Debts.
✓

Answer

Total Assets = 12,50,000 Total Debts = 10,00,000 Equity = Total Assets - Total Liabilities = 12,50,000 - 10,00,000 = 2,50,000 Long-term Debts = Total Debts - Current Liabilities = 10,00,000 - 5,00,000 = 5,00,000 $\text{Debt-Equity Ratio}=\frac{\text{Long-Term Debit}}{\text{Equity}}$$=\frac{5,00,000}{2,50,000}=2:1$

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