From the following Balance Sheet of ABC Ltd. as at 31st March, 2019, Calculate Debt to Equity Ratio:

Particulars Amount
(Rs.)
I. EQUITY AND LIABILITIES
1. Shareholder’s Funds
(a) Share Capital:
(i) Equity Share Capital – 5,00,000
(ii) 10% Preference Share Capital 5,00,00010,00,000
(b) Reserves and Surplus – 2,40,000
 
2. Non-Current Liabilities 
Long-term Borrowings (Debentures)2,50,000
 
3. Current Liabilities :
(a) Trade Payables4,30,000
(b) Other Current Liabilities20,000
(c) Short-term Provisions: Provision for Tax3,00,000
Total22,40,000
II. ASSETS
1. Non-Current Assets
Fixed Assets:
(i) Tangible Assets6,40,000
(ii) Intangible Assets1,00,000
 
2. Current Assets
(a) Inventories7,50,000
(b) Trade Receivables6,40,000
(c) Cash and Cash Equivalents1,10,000
Total22,40,000
 

SOLUTION

Long-term Debt = Debentures = 2,50,000
Equity = Equity Share Capital + 10% Preference Share Capital + Reserves and Surplus
= 5,00,000 + 5,00,000 + 2,40,000
= 12,40,000

Debt equity ratio = Long-term Debt / equity
= 2,50,000 / 12,40,000
= 0.2: 1

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