Based on following data related to Ambe limited, Jaipur, Answer question.
|
|
₹ |
|
Revenue from operations |
8,40,000 |
|
Cost of revenue from operations |
4,20,000 |
|
Selling Expenses |
80,000 |
|
Administrative Expenses |
40,000 |
|
Equity share capital |
1,00,000 |
|
8% preference share capital |
50,000 |
|
10% debentures |
1,00,000 |
|
Profit after Tax |
1,74,000 |
|
Tax Rate |
40% |
Identify the ideal debt-equity ratio.
Answer & explanation
Correct answer: option 2
The correct answer is Option 2 - 2 : 1.
*The ideal debt -equity ratio is 2:1. Here the ratio is 2:3 which is not good for company.
Debt-Equity Ratio = Debts/Equity
= 1,00,000/1,50,000
= 2:3
Debt = 10% debentures i.e. 1,00,000.
Equity = Equity share capital + 8% preference share capital
= 1,00,000 + 50,000
= 1,50,000