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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