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Debt-Equity Ratio is calculated as
ANet Profit / Total Assets
BCurrent Assets / Current Liabilities
CSales / Capital
DTotal Debt / Shareholders Funds
Answer & Solution
Correct answer: D. Total Debt / Shareholders Funds
1. Debt-Equity Ratio measures long-term solvency.
2. Formula: Total Debt (long-term liabilities) / Shareholders Funds.
3. Lower ratio is considered safer; an ideal benchmark is 2:1 or less.
4. Hence (A) is correct.
_Source: Maharashtra Balbharati Std XII Book-Keeping & Accountancy, Ch 9 "Analysis of Financial Statements", §9.4 ¶§9.4_
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