GK
ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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In the debt equity ratio, equity refers to
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Only reserves
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Only equity capital
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Only preference capital
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Both preference and equity capitals plus all reserves
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Explanation:
Detailed explanation-1: -Preference shares are a mixture of debt and equity, they behave as equity by carrying the element of risk as the principal is not secured while they pay a fixed rate of interest in the form of dividends.
Detailed explanation-2: -Solution. Debt-equity ratio is a sub-part of Long-term solvency ratio.
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