Accountancy · Class 12
Debt-Equity Ratio Calculator for Class 12 Accountancy
Calculate debt to equity ratio = Long-term Debt ÷ Shareholders’ Funds. Free Class 12 Accountancy calculator with solved examples, step-by-step working and common mistakes.
Formula
Debt-Equity Ratio = Long-term Debt ÷ Shareholders’ Funds
Worked example
Long-term debt 3,00,000 and shareholders funds 6,00,000 gives 0.5:1.
The interactive calculator on this page accepts your own question values and displays the final answer with step-by-step working.
Debt to Equity Ratio · Class 12 Accountancy
How to calculate debt to equity ratio
Debt-Equity Ratio = Long-term Debt ÷ Shareholders’ Funds
- Identify the long-term debt given in the question.
- Identify shareholders’ funds.
- Divide long-term debt by shareholders’ funds.
- Write the answer as a ratio, for example 0.5:1.
Solved example 1
Long-term debt = ₹3,00,000 and shareholders’ funds = ₹6,00,000.
Debt-Equity Ratio = 3,00,000 ÷ 6,00,000 = 0.5:1.
This means long-term debt is half of shareholders’ funds.
Solved example 2
Long-term debt = ₹8,00,000 and shareholders’ funds = ₹4,00,000.
Debt-Equity Ratio = 8,00,000 ÷ 4,00,000 = 2:1.
This means the long-term debt amount is twice the shareholders’ funds amount. The ratio itself describes the relationship; whether a particular level is desirable depends on the context and the convention used in the question or textbook.
Read the ratio correctly
- 0.5:1 → ₹0.50 of long-term debt for every ₹1 of shareholders’ funds.
- 1:1 → Long-term debt and shareholders’ funds are equal.
- 2:1 → ₹2 of long-term debt for every ₹1 of shareholders’ funds.
Common exam mistakes
- Reversing the formula and dividing equity by debt.
- Using total assets in place of shareholders’ funds.
- Forgetting to simplify the final answer into ratio form.
- Mixing values from different periods or units.
- Assuming every textbook or exam question classifies every liability in exactly the same way — follow the definitions supplied in your prescribed material.
Exam habit: write the formula first, substitute the figures, show the division and then write the final ratio.
Frequently asked questions
What formula does the Debt-Equity Ratio Calculator use?
This calculator uses: Debt-Equity Ratio = Long-term Debt ÷ Shareholders’ Funds. The interactive page shows the working step by step.
Is the Debt-Equity Ratio Calculator free?
Yes. It is free to use and does not require a login.
Can I use the calculator for exam preparation?
Yes. Use it to check numerical working and then practise writing the formula, substitution and final answer yourself.
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