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

From the Following information , compute Debt-Equity Ratio:

                                              Rs.

Long Term Borrowings          2,00,000

Long Term Provision             1,00,000

Current Liabilities                    50,000

Non-Current-Assets              3,60,000

Current -Assets                       90,000

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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

                  = 90,000 + 3,60,000

                  = 4,50,000

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

                      = 2,00,000 + 1,00,000 + 50,000

                      = 3,50,000

Therefore, Shareholder's funds = Total Assets – Total Liabilities

                                              = 4,50,000 – 3,50,000

                                              = 1,00,000

Long-Term Debt = Long Term Borrowings + Long-term Provisions

                        = 2,00,000 + 1,00,000

                        = Rs.3,00,000

`"Therefore, Debt Equity Ratio ="300000/100000=3:1`

 

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