The CFO of a company decides to maintain the capital structure as 1/2. The finance raised from owners and shareholders is Rs. 300 crore. How much debt financing does he need?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → 150 crore
Capital structure ratio = Debt : Equity = 1 : 2
Equity (owners’ funds) = ₹300 crore
Let debt = x
Then, according to the ratio,
x / 300 = 1 / 2
x = (300 × 1) / 2
x = ₹150 crore