Question : The Debt-Equity Ratio of a Company is 1: 2. Payment of Dividend Payable would
Option 1: Increase debt to equity ratio
Option 2: Decrease debt to equity ratio
Option 3: No change
Option 4: Increase current ratio
Answer (1)
9th Jan, 2024
Correct Answer: No change
Solution : Answer = No change
Payment of dividend payable will neither increase nor decrease long-term debt and balance of shareholder fund. Payment of dividend payable does not affect long-term debt or shareholder funds, so there is no change in the debt-equity ratio. Dividend payments involve only the distribution of profits and do not impact the capital structure.
Hence, the correct option is 3.
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