Q. 42 Solution of Accounting Ratios Chapter TS Grewal Book Class 12 2021-22

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Are you looking for the solution of Question number 42 of the Accounting Ratios of TS Grewal Book 2021-22 Edition for the 2021-22 session?

Question number 42 of the Accounting Ratios chapter is a practical one.

Solution of Question Number 42 of Accounting Ratios Chapter of TS Grewal Book 2021-22 Class 12

Question 42.

When Debt to Equity Ratio is 2, state giving reasons, whether this ratio will increase or decrease or will have no change in each of the following cases:=

1). Sales of Land (Book Value ₹ 400,000 for ₹ 500,000

2) Issue of Equity shares for the purchase of Plant and Machinery worth ₹ 10,00,000

3) Issue of Preference Shares for Redemption of 13% debentures worth ₹ 10,00,000.

Solution:-

S.NQuestionReason
1.Sales of Land (Book Value ₹ 4,00,000 for ₹ 5,00,000Sales of land at a profit would increase equity. due to the increased denominator, the overall debt to equity ratio would decrease.
2.Issue of Equity Shares for the purchase of Plant and Machinery worth ₹ 10,00,000Issue of Equity shares will increase equity. due to increased denominator, the overall debt to equity ratio would decrease.
3.Issue of Preference Shares for Redemption of 13% debentures worth ₹10,00,000Debt would decrease and equity increases. due to increase in denominator in greater amount. overall debt to equity ratio would decrease.
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