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From the Following Information, Compute Debt-equity Ratio - Accountancy

From the Following information, compute Debt-Equity Ratio

Long-Term Borrowings 4,00,000
Long-Term Provision 2,00,000
Current Liabilities 1,00,000
Non-Current-Assets 7,20,000
Current -Assets 1,80,000
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Solution

Debt Equity Ratio  = `"Long Term Debt"/"Shareholder's Funds"`

Total Assets = total Liabilities + Shareholder’s Funds

Total Assets = Current Assets + Non-Current Assets

= 1,80,000 + 720,000 = 9,00,000

Total Liabilities = Long-Term Borrowings + Long-Term Provisions + Current Liabilities

= 4,00,000 +2,00,000+1,00,000 = 7,00,00

Therefore, Shareholder's funds = Total Assets —Total Liabilities
= 9,00,000 —7,00,000 = 2,00,000

Long-Term Debt = Long Term Borrowings + Long-term Provisions
= 4,00,000 +2,00,000 =Rs 6,00,000

Therefore, Debt - equity ratio - `600000/200000` = 3 : 1

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