From the following data , calculate Debt to Equity Ratio.
i. Share Capital = 1,00,000
ii. General Reserve = 50,000
iii. Balance in Statement of Profit and Loss A/c = 10,000
iv.Long term Debts = 80,000
v. Bills Payable = 20,000
vi. Bank Overdraft = 10,000
Answer & explanation
Correct answer: option 2
Debt to Equity = Long term Debts/ Share holder's Fund
= 80,000/ 1,60,000
= 1:2
* Shareholder's Fund = Share Capital + General Reserves + Balance in P & L
= 1,00,000 + 50,000 + 10,000
* Long term Debts = 80,000