Question

Debt - Equity ratio may be calculated as _______.

• A. $\frac{\text{External equities}}{\text{Internal equities}}$
• B. $\frac{\text{Shareholders funds}}{\text{Total tangible assets}}$
• C. $\frac{\text{Internal equities}}{\text{External equities}}$
• D. $\frac{\text{Total intangible assets}}{\text{Internal equities}}$

Answer 1

The correct option is A $\frac{\text{External equities}}{\text{Internal equities}}$

Debt-equity ratio indicates that how much debt a company is using to finance its assets relative to the value of shareholder's equity. The formula for calculating it is: External equities / internal equities. It is also referred to as external-internal equity ratio or gearing ratio.