Read the following information and answer the question.
| PARTICULARS | AMOUNT (₹) |
| Equity share capital | 15,00,000 |
| General reserve | 10,00,000 |
| Profit and loss balance ( negative) | 1,00,000 |
| Debentures | 10,00,000 |
| Loan from bank | 7,00,000 |
| Current liabilities | 4,00,000 |
| Goodwill | 5,00,000 |
| Other non-current assets | 22,00,000 |
| Current assets | 18,00,000 |
What will be the debt-equity ratio?
Answer & explanation
Correct answer: option 2
The correct answer is option 2- 0.71:1.
* Long term debts = Debentures + loan from bank
= 10,00,000 + 7,00,000
= ₹17,00,000
* Equity = Equity share capital + general reserve - profit and loss balance (negative balance)
= 15,00,000 +10,00,000 - 1,00,000
= ₹24,00,000
Debt-Equity Ratio = Debts/ Equity
= 17,00,000/ 24,00,000
= 0.71:1