Question

From the following information, calculate Debt to Equity Ratio: 

	₹
10,000 Equity Shares of ₹ 10 each fully paid	1,00,000
5,000; 9% Preference Shares of ₹ 10 each fully paid	50,000
General Reserve	45,000
Surplus, i.e., Balance in Statement of Profit and Loss	20,000
10% Debentures	75,000
Current Liabilities	50,000

Answer 1

Long-Term Debt = Debentures = Rs 75,000
Shareholder’s Funds = Equity Share Capital + Preference Share Capital + General Reserve + Surplus
= Rs 1,00,000 + Rs 50,000 + Rs 45,000 + Rs 20,000 = Rs 2,15,000

Debt-Equity Ratio

= `"Long-Term Debts"/"Shareholder /unds" = 75000/215000 = 0.35 : 1`