Question

from the following asscertain the debt equity ratio equity share capital 200000 general reserve 160000 10% debenture 150000 current laiblities 100000 preliminary expenses 10000​

Answer 1

Answer:

Debt to equity is 0.70 : 1

Explanation:

The formula to compute debt to equity ratio is:

Debt to equity = Total Debt / Total Equity

where,

Total debt = Current liabilities + Debenture

                 = 100,000 + 150,000

                 = 250,000

Total Equity = Equity share capital + General Reserve

                    = 200,000 + 160,000

                    = 360,000

D/ E ratio = 250,000 / 360,000

                = 0.70 : 1

Answer 2

Debt-Equity ratio = 0.71:1

Explanation:

Given:

Equity share capital = 2,00,000

General reserve = 1,60,000

10% Debenture  = 1,50,000

Current liabilities = 1,00,000

Preliminary expenses = 10,000

Computation:

Shareholder's fund = Equity share capital + General reserve - Preliminary expenses

= 2,00,000 +1,60,000 - 10,000

= 3,50,000

Debt-Equity ratio = Total debts / Shareholder's fund

= (1,50,000 +1,00,000) / 3,50,000

Debt - Equity ratio = 0.71:1

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