Question

X Ltd. has a Debt-Equity Ratio of 3 : 1. According to the management, it should be maintained at 1 : 1. What are the choices in front of management to do so?

Options

• Increase equity

• Reduce debt 

• Both, i.e, increase equity and reduce debt 

• All of the above

Answer 1

All of the above.

Explanation:

To balance the debt-to-equity ratio, the corporation must either raise equity, reduce debt, or do both.