Question
An entity has Equity Share Capital (equity
shareholders’ funds) of ₹10,00,000, Preference Share Capital of ₹4,00,000, and Long-term Debt of ₹6,00,000. Compute the Capital Gearing Ratio.Solution
Fixed cost capital = Preference share capital + Long-term debt = ₹4,00,000 + ₹6,00,000 = ₹10,00,000 Equity shareholders’ funds = ₹10,00,000 Capital gearing ratio = ₹10,00,000 ÷ ₹10,00,000 = 1:1.
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