The debt-equity ratio is calculated as: MCQ with Answer and Explanation

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The debt-equity ratio is calculated as:

A. Long-term Debts / Shareholders' Equity

B. Total Debts / Shareholders' Equity

C. Total Assets / Shareholders' Equity

D. Current Liabilities / Shareholders' Equity

Answer: Option A

Solution (By JKSSB Mock Tests)

The debt-equity ratio typically measures long-term solvency and is calculated as Long-term Debts divided by Shareholders' Equity.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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Question #1

Under AS 19 'Leases', a lease is classified as finance lease if:

A. Lease term is less than one year

B. It transfers substantially all risks and rewards incidental to ownership

C. It is an operating lease

D. Lessor retains ownership

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Correct Answer: Option B

Explanation:
Finance lease transfers substantially all risks and rewards of ownership to the lessee.

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Question #2

A liability arising from a past event, whose existence depends on a future uncertain event, is known as:

A. Contingent Liability

B. Fixed Liability

C. Deferred Liability

D. Current Liability

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Correct Answer: Option A

Explanation:
Contingent liabilities depend on the outcome of a future event (like a pending lawsuit) and are disclosed in footnotes.

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Question #3

In financial management, 'Float' refers to:

A. The time difference between writing a cheque and its actual clearance from the bank

B. The amount of petty cash

C. Issuing new shares

D. Sinking fund investments

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Correct Answer: Option A

Explanation:
Float is the delay in the clearing system, creating a temporary discrepancy between the firm's cash balance and the bank's ledger balance.

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