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Question
Calculate Debt Equity Ratio, from the following information:-
Total external liabilities Rs. 5,00,000, Balance Sheet Total Rs. 10,10,000 Current liabilities Rs. l,00,000 Fictitious Assets Rs. 10,000.
Options
4 : 5
2 : 9
1 : 6
2 : 2
MCQ
Solution
4 : 5
Explanation:
Long-term Debt = Total External Liabilities - Current Liabilities
= Rs. 5,00,000 - Rs. 1,00,000
= Rs. 4,00,000
Total Non-fictitious Assets = Total Assets - Fictitious Assets
= Rs. 10,10,000 - Rs. 10,000
= Rs. 10,00,000
Shareholders Funds = Non-fictitious Total Assets - Total liabilities
= Rs. 10,00,000 - Rs. 5,00,000
= Rs. 5,00,000
Debt Equity Ratio = Rs. 4,00,000/Rs. 5,00,000
Debt Equity Ratio = 4 : 5.
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