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    Question

    Refer to the following information to answer the next 4 questions (Q1 to Q4)

    Calculate the Debt Equity ratio of the company.

    A 0.53 Correct Answer Incorrect Answer
    B 0.60 Correct Answer Incorrect Answer
    C 0.75 Correct Answer Incorrect Answer
    D 1.33 Correct Answer Incorrect Answer
    E 1.88 Correct Answer Incorrect Answer

    Solution

    Debt equity = Total Loans/ shareholders’ funds   Loans = 8% debentures             = 32,000   Shareholders’ funds = Equity share capital + Capital reserve + Profit& Loss a/c                                     = 40,000 + 8,000 + 12,000                                     = 60,000   Debt equity = 32,000/60,000                         = 0.53

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