Question 20 of 38
Q.
From the following information calculate debt equity ratio.
Balance Sheet (Extract) as on 31.03.2018
| Particulars | ₹ |
|---|---|
| I. Equity and Liabilities | |
| 1. Shareholder's Funds | |
| (a) Share capital — Equity share capital | 1,00,000 |
| (b) Reserves and surplus | 60,000 |
| 2. Non-Current liabilities : Long-term borrowings (Debentures) | 80,000 |
| 3. Current liabilities : (a) Trade payables | 50,000 |
| (b) Other current liabilities — Outstanding expenses | 30,000 |
| Total | 3,20,000 |
Puducherry TnboardTamil Nadu HSC (DGE) Commerce Board 2022Subjective· 3mImportance★★★★★
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Start your 14-day free trial to unlock the full solution →Debt-Equity Ratio = Long-term Debt ÷ Shareholders' Funds = ₹80,000 ÷ ₹1,60,000 = 0.5 : 1.
Concept (TN HSC Class-12 Accountancy — Ratio Analysis): the debt-equity ratio is a solvency ratio showing the relationship between borrowed long-term funds and the proprietors' funds. A lower ratio means a safer, less risky capital structure.
Step 1 — Shareholders' Funds
| Particulars | ₹ |
|---|---|
| Equity share capital | 1,00,000 |
| Add: Reserves and surplus | 60,000 |
| Shareholders' Funds | 1,60,000 |
Step 2 — Long-term Debt = Long-term borrowings (Debentures) = ₹80,000.
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