Debt to Equity Ratio

Q.

How to calculate the fixed asset coverage ratio?

Q.

Are preference shares debt or equity?

Q. = Total assets – Total liabilities

1. Current Asset
2. Reserves
3. Equity
4. Borrowings

Q.

Debt-equity ratio is a sub-part of _______.

1. Short-term solvency ratio

2. Long-term solvency ratio

3. Debtors turnover ratio

4. None of these

Q.

What Is Leverage in Financial Management?

Q.

The debt-to-equity ratio is a measure of a firm's ___

1. Financial leverage

2. Operating Leverage

3. Profitability

4. Liquidity

Q. Debt to Equity ratio is the ratio of debt to equity or shareholders’ funds

1. short term
2. long term
3. current
4. other current

Q.

What is the leverage ratio formula?

Q.

Q.

Which ratio shows the proportion of equity and debt a company is using to finance its assets and the extent to which shareholder's equity can fulfill obligations to creditors in the event of a business decline?

1. Current ratio

2. Inventory turnover ratio

3. Debt equity ratio

4. None of these

Q.

What are long-term liabilities?

Q.

A company with a debt-to-equity ratio of 2.5:1 and Rs 15, 00, 000 of shareholders' funds has debt of ________

1. 2.90 lacs

2. 37.5 lacs

3. 7.14 lacs

4. 8.23 lacs

Q.

Debt Equity Ratio = ___/ Shareholder`s funds

1. External liabilities

2. Equity share capital

3. Internal Liabilities

4. All of these

Q.

PRACTICAL PROBLEMS

Sushil and Sumit were in partnership sharing profits and losses in the proportion of 3/5 and 2/5 respectively. On 31^st March, 2005 they decide to dissolve the firm when their Balance Sheet was as under:

Balance Sheet as on 31st March, 2005
Liabilities	Amount Rs	Assets	Amount Rs
Sushil’s Capital	20, 000	Plant and Machinery	15, 000
Sumit’s Capital	18, 000	Stock	15, 000
General Reserve	5, 000	Sundry Debtors	22, 000
Sumit’s Loan A/c	2, 000	Bank	3, 000
Sundry Creditors	10, 000
	55, 000		55, 000

The Assets realised as follows: Stock Rs 14, 000, Plant and Machinery Rs 12, 000 and Debtors Rs 20, 000. The Sundry Creditors were paid Rs 9, 000 in full settlement.

Prepare: Realisation Account, Partners Capital Accounts and Bank Account.

Q. Debt - Equity ratio may be calculated as _______.

1. $\frac{\text{External equities}}{\text{Internal equities}}$
2. $\frac{\text{Internal equities}}{\text{External equities}}$
3. $\frac{\text{Total intangible assets}}{\text{Internal equities}}$
4. $\frac{\text{Shareholders funds}}{\text{Total tangible assets}}$

Q.

A ______ debt-to-equity ratio indicates a lower amount of financing by debt via lenders versus funding through equity via shareholders.

1. Lower

2. Higher

3. Average

4. None of these

Q. Opening capital is ascertained by preparing _________.

1. Cash account
2. Opening statement of affairs
3. Total capital account
4. Total debtors account

Q. Fill in the blanks with appropriate words in the following sentences.
The difference between Assets and Liabilities of a Trade is called _________.

Q.

A greater degree to which operations are funded by borrowed money means a greater risk of bankruptcy if business declines. True or False

1. False

2. True

Q.

From the following information prepare the balance sheet of Gitanjali Ltd., as per the (Revised) Schedule VI:

Inventories Rs. 14, 00, 000; Equity Share Capital Rs. 20, 00, 000; Plant and Machinery Rs. 10, 00, 000; Preference Share Capital Rs. 12, 00, 000; Debenture Redemption Reserve Rs. 6, 00, 000; Outstanding Expenses Rs. 3, 00, 000; Proposed Dividend Rs. 5, 00, 000; Land and Building Rs. 20, 00, 000; Current Investments Rs. 8, 00, 000; Cash Equivalent Rs. 10, 00, 000; Short term loan from Zaveri Ltd. (A Subsidiary Company of Twilight Ltd.) Rs. 4, 00, 000; Public Deposits Rs. 12, 00, 000.

Q. A summary record of the changes in a particular asset, liability or owners equity is known as _________.

1. Account
2. Account current
3. Proforma Account
4. Ledger

Q. Long term liabilties are shown under the head liabilities.

1. current
2. other current
3. long-term
4. non-current

Q. Debt-Equity ratio is also known as _____________.

1. External-internal equity ratio
2. Quick ratio
3. Acid test ratio
4. Proprietory ratio

Q.

Why is it risky to invest borrowed money rather than use your own money in your business?

Q. Answer the following in brief :

What are the components of current ratio?

Q.

How is equity calculated?

Q. Given the equity multiplier is 4.55. The debt-asset ratio of a firm, according to DuPont analysis will be _________.

1. 0.22
2. 0.78
3. 1.28
4. 1.56
5. Data insufficient

Q. Debt to total assets of a firm is 0.2. The debt to equity ratio would be _______.

1. 0.8
2. 0.25
3. 1
4. 0.75

Q. Which ratio is considered as safe margin of solvency?

1. Quick ratio
2. Current ratio
3. Liquid ratio
4. None of the above

Q. Which of the following account balance will be shown on debit side of Trial Balance?

1. Outstanding expenses
2. Cash a/c
3. Short-term loan
4. Creditors