Question

Assertion (A): Debt means Long-term Liabilities.

Reason (R): Debt includes both Long-term and Short-term Liabilities.

In the context of the above two statements, which option is correct?

पर्याय

• Assertion (A) and Reason (R) are correct, but Reason (R) is not the correct explanation of Assertion (A).

• Both Assertion (A) and Reason (R) are correct, and Reason (R) is the correct explanation of Assertion (А).

• Assertion (A) is correct, and Reason (R) is incorrect.

• Assertion (A) is not correct, but Reason (R) is correct.

Answer 1

Assertion (A) is correct, and Reason (R) is incorrect.

Explanation:

In accounting ratio analysis (such as the Debt-to-Equity Ratio), the term “Debt” refers exclusively to long-term liabilities like debentures, bonds, and long-term loans, which makes Assertion (A) factually correct. Conversely, the term for the combination of short-term and long-term liabilities is “Total Debt.” Since standard debt ratios deliberately isolate long-term obligations from current liabilities to test long-term solvency, Reason (R) is incorrect.