[CBSE] Q. 49 Solution of Accounting Ratios TS Grewal Class 12 (2025-26)

Solution of Question 49 Accounting Ratios of TS Grewal Book 2025-26 session CBSE Board?

Assuming that the Debt to Equity Ratio is 2 : 1, State, giving reasons, which of the following transactions would (i) Increase, (ii) Decrease, (iii) Not alter Debt to Equity RAtio:

(i) Issue of new shares for cash.

(ii) Conversion of debentures into equity shares.

(iii) Sale of a fixed asset at profit.

(iv) Purchase of a fixed asset on long-term deferred payment basis.

(v) Payment to creditors.

[Ans.: (i) Decrease; (ii) Decrease; (iii) Decrease; (iv) Increase; (v) No change.]

Solution:-

(i) Issue of new shares for cash.

The debt-to-equity ratio measures the proportion of debt to equity in a company’s capital structure. Issuing new shares for cash increases equity, while debt remains unchanged, leading to a reduction in the debt-to-equity ratio.

Before the issuance of new shares:

• Debt: ₹ 2,00,000
• Equity: ₹ 1,00,000
• Debt-to-Equity Ratio: 2,00,000/1,00,000 = 2 : 1

After the issuance of new shares:

Let’s assume the company issues shares worth ₹ 50,000.

• Debt: ₹ 2,00,000 (unchanged)
• Equity: ₹ 1,00,000 + ₹ 50,000 = ₹ 1,50,000
• Debt-to-Equity Ratio: 2,00,0001,50,000 = 1.33 : 1

Impact: The debt-to-equity ratio decreases from 2 : 1 to 1.33 : 1, reflecting a less leveraged capital structure and a stronger equity base. The exact impact depends on the value of shares issued. Let me know if you’d like to refine this with another scenario!

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