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Question
State whether creditors would prefer lending to a company with a high Debt-Equity Ratio or a low Debt-Equity Ratio. Give a reason.
Solution
A company with a low debt-to-equity ratio is more attractive to creditors and lenders since it presents fewer risks due to its reduced reliance on loans.
Companies with lower debt-to-equity ratios are more appealing to creditors since they are typically thought to be more financially solid and less likely to experience loan default. Conversely, businesses with a high debt-to-equity ratio carry greater risks because it indicates that the company's capital is reliant more on loans than on equity or shareholdings.
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From the Following information , compute Debt-Equity Ratio:
Rs.
Long Term Borrowings 2,00,000
Long Term Provision 1,00,000
Current Liabilities 50,000
Non-Current-Assets 3,60,000
Current -Assets 90,000
From the Following information, compute Debt-Equity Ratio
| Rs | |
| Long-Term Borrowings | 8,00,000 |
| Long-Term Provision | 4,00,000 |
| Current Liabilities | 2,00,000 |
| Non-Current-Assets | 14,40,000 |
| Current -Assets | 3,60,000 |
Calculate Debt-Equity Ratio
| Particulars | Rs |
| Total Assets | 3,50,000 |
| Total Debts | 2,50,000 |
| Current Liabilities | 80,000 |
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