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Question
Debt to Capital Employed ratio is 0.3:1. State whether the following transaction, will improve, decline or will have no change on the Debt to Capital Employed Ratio. Also give reasons for the same.
Sale of Equipment costing ₹ 10,00,000 for ₹ 9,00,000.
Options
Ratio will improve.
Ratio will decline.
Ratio has no change
Solution
Ratio will improve.
Reason – Capital Employed will decrease and Debt will remain the same.
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| ₹ | ₹ | |||
| Trade Receivable (Sundry Debtors) | 1,80,000 | Bills Payable | 20,000 | |
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| Land and Building | 5,00,000 | Expenses Payable | 80,000 |
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