Question

On the basis of the following data,the debt equity ratio of the company will be: Equity share capital Rs:500000 General reserve 320000 preliminary expenses Rs 20000 debuntures 320000 current liabilities Rs 80000​

Answer 1

Given:

Equity Share Capital = Rs.  5,00,000

General Reserve = Rs. 3,20,000

Preliminary Expenses = Rs. 20,000

Debentures = Rs. 3,20,000

Current Liabilities = Rs. 80,000​

To Find:

Debt Equity Ratio = ?

Solution:

Shareholder's Equity = Equity Share Capital + General Reserve - Preliminary                                                                

                                      Expenses

Shareholder's Equity = 500000 + 320000 - 20000 = 800000

Total Liabilities = Debentures + Current Liabilities

Total Liabilities = 320000 + 80000 = 400000

Debt Equity Ratio = $\frac{Total Liabilties}{Shareholder's - Equity}$

Debt Equity Ratio = $\frac{400000}{800000}$ = 0.5

Answer 2

Answer:

(A) 0.4 : 1

Explanation:

debt equity ratio = total debt/equity

total debt = 3,20,000

equity = 5,00,000+ 3,20,000-20,000

= 8,00,000

debt equity ratio= 3,20,000/8,00,000

= 0.4:1