Question

Calculate debt to equity ratio: equity share capital 500000,general reserve 90000, accumulated profits 50000,10% debentures 130000, current liabilities 100000

Answer 1

Debt-Equity ratio = 0.20 : 1

Explanation:

Given:

Equity share capital = 5,00,000

General reserve = 90,000

Accumulated profits  = 50,000

10% Debentures = 1,30,000

Current liabilities = 1,00,000

Calculation:

Shareholder's fund = Equity share capital + General reserve + Accumulated profits

= 5,00,000 + 90,000 + 50,000

Shareholder's fund = 6,40,000

Debt-Equity ratio = Long term debts / Shareholder's fund

= 1,30,000 / 6,40,000

Debt-Equity ratio = 0.20 : 1

Note: Current liabilities not include in long term debt.

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Answer 2

$\sf\red{10\% \: debentures =1,30,000}$

$\sf\red{Equity = 5,00,000+90,000+50,000}$

$\implies$$\sf{6,40,000}$

$\sf\red{Debt \: to \: equity \: ratio = \frac{Debt}{Equity}}$

$\implies$$\sf{\frac{1,30,000}{6,40,000}}$

$\implies$$\sf{0.203:1}$