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Question
From the following information calculate a debt-equity ratio.
Balance Sheet (Extract) as on
31st March, 2019
| Particulars | Amount ₹ |
| I. EQUITY AND LIABILITIES | |
| 1. Shareholders' funds | |
| (a) Share capital | |
| Equity share capital | 6,00,000 |
| (b) Reserves and surplus | 2,00,000 |
| 2. Non-current liabilities | |
| Long-term borrowings (Debentures) | 6,00,000 |
| 3. Current liabilities | |
| (a) Trade payables | 1,60,000 |
| (b) Other current liabilities | |
| Outstanding expenses | 40,000 |
| Total | 16,00,000 |
Ledger
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Solution
Debt Equity Ratio = `"Long term debt"/"Shareholder's Funds"`
Long term debt = Debenture = Rs. 6,00,000
Shareholder’s Fund = Equity share capital + Reserves & Surplus
= 6,00,000 + 2,00,00 = Rs. 8,00,000
Debt Equity Ratio = `600000/800000`
Debt Equity Ratio = 0.75:1
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