CUET Preparation Today
| What are the 2 parameters of the Debt-Equity ratio? |
Long-term Debts and Share Capital Long-term Debts and Shareholders' Funds Long-term Debts and Total Assets None of these |
| Long-term Debts and Shareholders' Funds |
| Debt-Equity Ratio measures the relationship between long-term debt and equity. If debt component of the total long-term funds employed is small, outsiders feel more secure. From security point of view, capital structure with less debt and more equity is considered favourable as it reduces the chances of bankruptcy. Normally, it is considered to be safe if debt-equity ratio is 2 : 1. However, it may vary from industry to industry. |
