Ratio analysis query!

1011 views 3 replies

Hi All,

I hope my question is specific and it is not a repeat question.

From the CA Exam perspective can anyone please tell me which formula should I use in exam if a question comes on DEBT/EQITY Ratio. There are 3-4 formulas available in the books, which are as follows:

1) Long Term Debt/ (Shareholders Funds+ Long Term Debt)

2)Long Term Debt/ Owner's Equities

3) External Equities/ Internal Equities or All Debts/Owner's Funds

Which one should one be using for Financial Management, IPCC exam?

 

Replies (3)
Originally posted by : Mayank Saini

Hi All,

I hope my question is specific and it is not a repeat question.

From the CA Exam perspective can anyone please tell me which formula should I use in exam if a question comes on DEBT/EQITY Ratio. There are 3-4 formulas available in the books, which are as follows:

1) Long Term Debt/ (Shareholders Funds+ Long Term Debt)

2)Long Term Debt/ Owner's Equities

3) External Equities/ Internal Equities or All Debts/Owner's Funds

Which one should one be using for Financial Management, IPCC exam?

 

 

Equity = Comapy Funds which include Share Capital and reserves

Debt = All external obligations like Debentures, loans

All debts/Owner's funds is the most appropriate formula

 

 

i am specifying what i have learned at my grad. level & ipcc

DEBT -EQUITY RATIO = LONG TERM FUNDS BORROWED BY THE COMPANY

                                           {ESC +R&S-ME +PSC} SHAREHOLDERS FUND

i am specifying what i have learned at my grad. level & ipcc

DEBT -EQUITY RATIO = LONG TERM FUNDS BORROWED BY THE COMPANY

                                           {ESC +R&S-ME +PSC} SHAREHOLDERS FUND

& IF IN EXAM ,QUESTION SPECIFICALLY PROVIDES ANY DIFFERENT RATIO e.g D/E  RATIO =DEBT / (DEBT + EQUITY)

THEN USE THE GIVEN RATIO

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