The debt-equity ratio of a company is 2:1. State, giving reason, if issue of
shares of 6,00,000 will increase, decrease or not affect the ratio
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Total Assets = Total Liabilities + Shareholder's Funds
Total Assets = Current Assets + Non-Current Assets
= 1,80,000 + 7,20,000 = 9,00,000
Total Liabilities = Long Term Borrowings + Long-Term Provisions + Current Liabilities
= 4,00,000 +2,00,000+1,00,000 = 7,00,000
Therefore, Shareholder's funds = Total Assets Total Liabilities
= 9,00,000 7,00,000 = 2,00,000 Long-Term Debt = Long Term Borrowings + Long-term Provisions = 4,00,000+2,00,000 = Rs 6,00,000
Therefore, Debt -equity ratio =
2,00,000
6,00,000
=3:1
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