question_answer

'Dreamz House' is a company engaged in developing and promoting housing projects. The total capital of the company is Rs. 75,00,000, out of which Rs. 30,00,000 has been raised from loans. Compute the following:

(i) The debt-equity ratio of the firm

(ii) The percentage of debt in the total capital of the firm.

Answer:

Total Capital of the Firm =\[Rs.75,00,000\] Debt =\[Rs.30,00,000\] Equity =\[\text{Rs}.45,00,000\text{ }(75,00,000-30,00,000)\](i)   Debt-equity Ratio \[=\frac{Debt}{Equity}\]                         \[=\frac{30,00,000}{45,00,000}=2:3\] (ii) Percentage of Debt in the Total Capital \[=\frac{30,00,000}{75,00,000}\times 100=40%\]