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Accounting Ratios 3.7
Illustration 2.

From the following Balance Sheet of Galaxy Ltd., compute Debt to Equity Ratio:

BALANCE SHEET as at 31st March, 2024
Particulars Note No. `
I. EQUITY AND LIABILITIES
1. Shareholders’ Funds
(a) Share Capital 7,00,000
(b) Reserves and Surplus 2,00,000
2. Non-Current Liabilities
(a) Long-term Borrowings 15,00,000
(b) Long-term Provisions 57,500
3. Current Liabilities
(a) Trade Payables 2,50,000
(b) Other Current Liabilities 55,000
(c) Short-term Provisions 25,000
Total 27,87,500
II. ASSETS
1. Non-Current Assets
Property, Plant and Equipment and Intangible Assets:
—Property, Plant and Equipment 17,47,500
2. Current Assets
(a) Inventories 5,00,000
(b) Trade Receivables 3,50,000
(c) Cash and Cash Equivalents 1,75,000
(d) Other Current Assets 1 15,000
Total 27,87,500

Note to Accounts
Particulars `

1. Other Current Assets
Accrued Income 10,000
Prepaid Expenses 5,000
15,000

Solution:
Debt
Debt to Equity Ratio =
Equity (Shareholders’ Funds)

` 15,57,500
= = 1.73 : 1.
` 9,00,000
Debt = Long-term Borrowings + Long-term Provisions
= ` 15,00,000 + ` 57,500 = ` 15,57,500.

Equity or Shareholders’ Funds = Share Capital + Reserves and Surplus
= ` 7,00,000 + ` 2,00,000 = ` 9,00,000.