can u tell me the idol ratio of debt equity ratio. i m confused it is 1:2 or 2: 1. there is different thinking of different authors about this ratio. so tell me pls
8 Replies
CA Devender Chauhan
(Group Financial Accountant)
(1526 Points)
Replied 14 April 2010
ideal debt equity ratio is 2:1
sampada
(ARTICLE ASSISTANT)
(136 Points)
Replied 14 April 2010
yes, agreed. The ideal debt-equity ratio is 2:1.
CA Anshu Agarwal
(B€ @LW@¥$ ]-[@Pp¥)
(1832 Points)
Replied 14 April 2010
it can very from case to case,
but some banks adopts debt - equity ratio upto 3.5 : 1
Ravindra Manek
(Chartered Accountant)
(74 Points)
Replied 14 April 2010
Ideal DE Ratio is 2:1. Regarding your confusion whether it is 1:2 or 2:1, try to understand the concept. Funding of any entity would be composed of its own fund and debt fund. Generally in most of the cases debt portion is more than the owner's fund. Now the question is that what is the ideal debt.. That depends on amount of equity.. So generally it is said that debt should not exceed twice of equity fund.. So ratio is 2:1. Hope it is now clear to you.
CA Himanshu Bansal
(Risk Manager)
(2345 Points)
Replied 14 April 2010
Ideal Considered to be 2:1 ...
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