From the following details, calculate Debt Equity ratio:

Solution

Debt/Equity Ratio is a debt ratio used to measure a company's financial leverage, calculated by dividing a company's total liabilities by its stockholders' equity. The D/E ratio indicates how much debt a company is using to finance its assets relative to the amount of value represented in shareholders' equity Debt/Equity ratio = (Long Term Borrowing)/(Share Capital + Reserve and Surplus)= 1,000,000/(800,000+200,000)= 1:1 Net income and current liabilities have nothing to do with Debt Equity ratio.