What is the formula of Debt Equity Ratio? Also define its
importance in a firm.

Answer Posted / saurabh

debt/equity ratio:

debt :(long term debt + short term debt)

equity : (common share + pref share+ reserves and surplus)

it is used to assess the
1)riskiness
2)used by banks to check the existing composition of debt -
should be on the lower side to leave scope for more debt

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