Question

The following information is related to a business.

Balance as at 31 December 2021
Detail
Share capital ($1 each)
Retain earnings
Share premium
General reserves
Long term loan
Amount
194341
24344
39782
27186
180663
Calculate debt to equity as a percentage to two decimal places.
Answer:

Answer 1

The debt to equity ratio as a percentage is 63.25%.

How to calculate the debt to equity?

Debt to equity ratio measures a company's relative mix of debt and shareholder equity which indicates its financial leverage and risk.

Debt to Equity Ratio = (Total Debt / Total Equity) * 100

The long-term loan (Debt) is $180,663.

Total Equity = Share capital + Retained earnings + Share premium + General reserves

= $194,341 + $24,344 + $39,782 + $27,186

= $285,653

Debt to Equity Ratio = $180,663 / $285,653

= 0.632456162

= 63.25%.

Therefore, the debt to equity ratio as a percentage is 63.25%.