Question : A company's debt to equity ratio is 1: 2. Which of the following transactions will result in an increase:
Option 1: Credit purchases of goods
Option 2: Cash issuance of debentures
Option 3: Cash issuance of new shares
Option 4: Redemption of debentures
Correct Answer: Cash issuance of debentures
Solution : Issue of new debenture for cash means an increase in debenture value so numerator value will increase hence ratio also increases. We can say debenture issues for cash increase the ratio between a company's debt to equity. Hence option 2 is the correct answer.
Question : The Debt-Equity Ratio of a Company is 1: 2. Goods purchased on Credit would
Option 1: Increase debt to equity ratio
Option 2: Decrease debt to equity ratio
Option 3: No change
Option 4: Increase current ratio
Question : State one transaction which results in a decrease in the 'Debt-Equity Ratio' and no change in the 'Current Ratio'
Option 1: Redemption of debentures in cash
Option 2: Redemption of debentures by cheque
Option 3: Paid cash to trade payable
Option 4: Conversion of debentures into shares
Question : The Debt-Equity Ratio of a Company is 1: 2. Payment of Dividend Payable would
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