On the basis of the following information, answer the question.
| Particulars | Amount (₹) |
| Share Capital: | |
| Equity share capital (₹10 each) | 12,00,000 |
| 12% Preference share capital | 3,00,000 |
| Reserves & Surplus | 5,00,000 |
| 10% Debentures | 12,00,000 |
| Current Liabilities | 3,00,000 |
| Fixed Assets | 28,00,000 |
| Current Assets | 7,00,000 |
| Net profit after tax as per Statement of Profit & Loss | 450000 |
| Tax | 150000 |
| Market Price of the Share | 34 |
Debt - Equity ratio of the company is:
Answer & explanation
Correct answer: option 1
The correct answer is option 1- 0.6 : 1.
Debts = 10% debentures
= 12,00,000
Shareholder funds = Share capital + Reserves and surplus
= 12,00,000 + 3,00,000 + 5,00,000
= 20,00,000
Debt-Equity Ratio = Debts / Shareholders funds
= 12,00,000/20,00,000
= 3:5
= 0.6:1