Question
From the following, calculate the Debt to Equity
Ratio: Share Capital: ₹5,00,000; Reserves: ₹3,00,000; Long-term Borrowings: ₹4,00,000; Current Liabilities: ₹2,00,000.Solution
Debt to Equity Ratio = Long-term Debt / Shareholders' Funds. Long-term Debt = ₹4,00,000. Shareholders' Funds = Share Capital + Reserves = 5,00,000 + 3,00,000 = ₹8,00,000. Ratio = 4,00,000 / 8,00,000 = 0.5 : 1.
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