Question : Assertion (A): The debt-equity ratio expresses the relationship between short-term debt and equity share capital of an enterprise. Reason (R): It does not measure of the relative contribution of the creditors and shareholders.
Option 1: Both A and R are true and R is the correct explanation of A.
Option 2: Both A and R are true, but R is not the correct explanation of A.
Option 3: A is true, but R is false.
Option 4: A is false, but R is true.
Correct Answer: A is true, but R is false.
Solution : The debt-equity ratio serves as a gauge for how equally creditors and owners or shareholders contributed to the capital used by the company. The debt-equity ratio is the simple ratio of all long-term debt and equity capital in the company. The debt-equity ratio describes the relationship between a company's short-term debt and equity share capital. Hence, the correct option is 3.
Question : Assertion (A): The fixed asset turnover ratio aids in evaluating the stability of the company's long-term financial condition. Reason (R): It displays the ratio of shareholders' funds to total long-term debt.
Question : Assertion (A): Debentures and long-term loans from banks and other financial institutions are included in the total long-term debt. Reason (R): Equity share capital, Preference share capital, Reserves, and Surplus are all included in the shareholders' money.
Question : Assertion (A): Both microeconomics and macroeconomics are supplementary to each other. Reason (R): The superiority of one approach over the other can not be claimed.
Question : Assertion (A): The current ratio assesses the firm’s ability to meet its short-term liabilities on time. Reason (R): The current ratios assess the ability of the firm to meet its current liabilities immediately
Question : Assertion: Physical capital is tangible in nature Reason: Physical capital can be seen and touchable.
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