Veda Pvt. Ltd has long-term debt of Rs.1,20,000 and shareholders' equity of Rs.3,00,000. The debt to equity ratio is: (a) 0.4 (b) 0.5 (c) 0.7 (d) 1.0
Answer
0.4
The correct answer is 0.4 — Therefore the debt‑to‑equity ratio is 0.4.
Step-by-step solution
- Identify debt (1,20,000) and equity (3,00,000).
- Compute ratio: .
- Match the value with the options – it is option (a).
- Therefore the debt‑to‑equity ratio is 0.4.
Common mistake: Reversing numerator and denominator
Concept tested: Solvency ratio – debt to equity
Published · How this solution was prepared and checked
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