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Questions
What is meant by debt-equity ratio?
What is Debt Equity Ratio?
Short Answer
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Solution
It is calculated to assess the long-term solvency position of a business concern. The debt-equity ratio expresses the relationship between long-term debt and shareholder’s funds.
Debt equity ratio = `"Long term debt"/"Shareholders funds"`
Capital employed = Shareholder’s funds + Noncurrent liabilities
Greater the return on investment better is than the profitability of a business and vice versa.
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