On the basis of following data the Debt Equity Ratio of a Company will be Equity Share Capital Rs5 0...........

On the basis of following data, the Debt-Equity Ratio of a Company will be:

Equity Share Capital Rs5,00,000; General Reserve Rs3,20,000; Preliminary Expenses Rs20,000; Debentures Rs3,20,000; Current Liabilities Rs80,000.

2.6 : 1

0.64: 1

0.39: 1

3.7 : 1

- Debt-Equity Ratio is calculated by dividing Total Debt by Total Equity.

- Equity includes:

- Equity Share Capital: Rs 5,00,000

- General Reserve: Rs 3,20,000

- Excludes Preliminary Expenses as they are not part of equity

- Total Equity: Rs 5,00,000 + Rs 3,20,000 = Rs 8,20,000

- Debt includes:

- Debentures: Rs 3,20,000

- Excludes Current Liabilities, as they are not long-term debt but short-term obligations

- Total Debt: Rs 3,20,000

- Debt-Equity Ratio = Total Debt / Total Equity = Rs 3,20,000 / Rs 8,20,000 = 0.39:1

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