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Question
From the following, ascertain Debt-Equity Ratio:
| ₹ | |
| Share Capital | 6,00,000 |
| Capital Reserve | 3,20,000 |
| General Reserve | 60,000 |
| Profit & Loss Balance | 1,40,000 |
| 8% Debentures | 5,00,000 |
| 10% Long term Loan | 3,40,000 |
| Long term Provision | 1,12,000 |
| Current Liabilities | 2,20,000 |
| Current Assets | 3,10,000 |
Numerical
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Solution
Dept Equity Ration = `"Debt"/"Equity"`
Dept = 8% Debentures + 10% Long term Loan + Long term Provision
= ₹ 5,00,000 + ₹ 3,40,000 + ₹ 1,12,000
= ₹ 9,52,000
Equity = Share Capital + Capital Reserve + General Reserve + Profit & Loss Balance
= ₹ 6,00,000 + ₹ 3,20,000 + ₹ 60,000 + ₹ 1,40,000
= ₹ 11,20,000
Dept Equity Ration = `(₹ 9,52,000)/(₹ 11,20,000)`
= 0.85 : 1
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