Total Assets Rs. 12,50,000; Total Debts Rs. 10,00,000; Current Liabilities Rs. 5,00,000. Calculate Debt to Equity Ratio.

SOLUTION

Total Assets = 12,50,000
Total Debts = 10,00,000
Equity = Total Assets − Total Liabilities
= 12,50,000 − 10,00,000
= 2,50,000

Long-term Debts = Total Debts − Current Liabilities
= 10,00,000 − 5,00,000
= 5,00,000

Debt equity ratio = Long-term Debt / equity
= 5,00,000 / 2,50,000
= 2: 1