Renaissance Foods Ltd has long‑term debt of Rs.1,80,000 and shareholders’ equity of Rs.3,60,000. What is its debt‑equity ratio? Express the answer to two decimal places.
Answer
0.50
The correct answer is 0.50 — Express to two decimal places: 0.50.
Step-by-step solution
- Identify long‑term debt: Rs.1,80,000.
- Identify shareholders’ equity: Rs.3,60,000.
- Apply the formula for debt‑equity ratio: debt ÷ equity.
- Compute 1,80,000 ÷ 3,60,000 = 0.50.
- Express to two decimal places: 0.50.
Common mistake: Dividing equity by debt instead of debt by equity
Concept tested: Solvency ratio
Published · How this solution was prepared and checked
← All Accounting Ratios questions