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A company has long‑term debt of Rs.1,40,000 and shareholders' equity of Rs.2,80,000. What is the debt to equity ratio?

easy MCQ 1 mark Class 12 · Accountancy · Accounting Ratios
  1. 0.5
  2. 1.0
  3. 0.25
  4. 0.75
Answer
0.5

The correct answer is 0.5 — Hence the debt to equity ratio is 0.5.

Step-by-step solution

  1. Use the definition: Debt to Equity Ratio = Long‑term debt ÷ Shareholders' equity.
  2. Substitute the values: 1,40,000 ÷ 2,80,000.
  3. Perform the division: 1,40,000 ÷ 2,80,000 = 0.5.
  4. Hence the debt to equity ratio is 0.5.
Common mistake: Using total debt instead of only long‑term debt.

Concept tested: Debt to Equity Ratio

Published · How this solution was prepared and checked

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