Total Assets Rs. 2,60,000; Total Debts Rs. 1,80,000; Current Liabilities Rs. 20,000. Calculate Debt to Equity Ratio.

SOLUTION

Total Debts = 1,80,000
Current Liabilities = 20,000
Long-term Debts = Total Debts − Current Liabilities
= 1,80,000 − 20,000
= 1,60,000

Equity = Total Assets − Total Liabilities
= 2,60,000 − 1,80,000
= 80,000

Debt equity ratio = Long-term Debt / equity
= 1,60,000 / 80,000
= 2: 1