Question : Equity share Capital Rs.20,00,000; Reserves Rs.5,00,000; Debenture Rs.10,00,000; Current liabilities Rs.8,00,000. Debt equity ratio will be -
Option 1: 0.32:1
Option 2: 0.40:1
Option 3: 0.72:1
Option 4: 0.50:1
Correct Answer: 0.40:1
Solution : The debt-to-equity ratio is calculated by dividing a company's total liabilities by the sum of its shareholders' equity. For the majority of businesses and industries, a desirable debt-to-equity ratio is around 2.0.
Hence the debt equity ratio is -
Debentures / (Equity share capital + Reserves)
1000000 / (2000000 + 500000)
0.40:1
Hence the correct answer is option 2.
Note :- Current liability is not included in debt for the purpose of Debt-equity ratio, since only Long term debt is taken to calculate this ratio.
Question : Equity Share Capital Rs.35,00,000; Reserve Rs.15,00,000; Debentures Rs.10,00,000; Current Liabilities Rs.8,00,000. What will be debt-equity ratio?
Option 1: 1:2
Option 2: 1:3
Option 3: 1:5
Option 4: 1:4
Question : Share Capital 12,00,000; Reserves and Surplus 8,00,000; Long-term Borrowings 25,00,000; Long-term Provisions 7 5,00,000; Current Liabilities 10,00,000. Total assets to debt ratio is
Option 1: 3:2
Option 2: 5:2
Option 3: 2.5:1
Option 4: None of the above
Question : The ratio of Current Assets (Rs.16,00,000) to Current Liabilities (Rs.10,00,000) is 1.6: 1. The accountant of the firm is interested in maintaining a Current Ratio of 2: 1, by paying off a part of the Current Liabilities. The amount of the Current Liabilities will be that should be paid, so that the Current Ratio at the level 2: 1 may be maintained.
Option 1: Rs 4,00,000
Option 2: Rs 5,00,000
Option 3: Rs 8,00,000
Option 4: Rs 10,00,000
Question : Equity Share Capital Rs.4,00,000; General Reserve Rs.2,40,000;Debentures Rs.3,20,000; Current Liabilities Rs.80,000 On the above information find out the Debt-Equity Ratio.
Option 3: 1:4
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