Question
Based on the same balance sheet data, the credit officer also wants to compute the capital gearing level of the borrower. Debt consists only of the term loan, and equity consists of equity capital and reserves. What is the Debt–Equity ratio?
Solution
Debt = 60. Equity = 40 + 20 = 60. D/E = 60 / 60 = 1 : 1.
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