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Question : Which of the following statements is incorrect?

Option 1: Decrease in Long term Debts decreases the Debt-Equity Ratio

Option 2: Increase in Long term Debts,increases the Debt-Equity Ratio

Option 3: Decrease in Shareholder’s Funds increases the Debt-Equity Ratio

Option 4: None of the above


Team Careers360 22nd Jan, 2024
Answer (1)
Team Careers360 23rd Jan, 2024

Correct Answer: None of the above


Solution : Answer = None of the above

If long-term term Debt decreases, then it also decreases the Debt Equity Ratio.

If Debt increases, then the Debt to debt-to-equity ratio will also increase.

If the Share Holder fund decreases, then the Debt to Equity Ratio will also increase because the Debt to Equity Ratio shows the relationship between Debt and Equity.
Hence, the correct option is 4.

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