Answer Posted / naresh
It reflect the relative claim of creditors and shareholders
against the assets of the business.
Debt Equity ratio =long term liabilities/shareholders funds
A Debt equity ratio of 2:1 is considered as ideal.
A firm with a debt equity ratio of 2 or less exposes its
creditors relatively lesser risk. A firm with a high debt
equity ratio expects its creditors to greater risk.
| Is This Answer Correct ? | 40 Yes | 9 No |
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