What is the Formula of debt equity ratio?
Also Define its importance in accountancy.
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Answer Posted / ajinkya jagtap
Debt equity ratio is classified under the head leverage or
capital structure ratio. That to long term ratios.
Importance of debt equity ratio : Where it shows the
relative claims of the creditors and shareholders of the
company. Creditors look into the financial strength of the
company in providing the long term debt. where
shareholder's having the right against the assets(profits)
of the company.
=Long term liabilities/Shareholders funds.
Shareholders funds = Equity+Preference+Reserves-Ficticious
assets
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