Question

Belrise industries, an auto ancillary company, plans to raise ₹ 2,150 crore through a public issue of equity shares. The funds will primarily be used to partly repay its debt.

Which ratios would be impacted by the decision of the Belrise industries?

P. Debt to Equity Ratio

Q. Inventory Turnover Ratio

R. Trade Receivable Turnover Ratio

S. Interest Coverage Ratio

Options

• Only P

• Only Q and R

• Only R and S

• Only P and S

Answer 1

Only P and S

Explanation:

Only P (Debt to Equity Ratio) and S (Interest Coverage Ratio) are impacted because issuing equity raises equity, while repaying debt lowers liabilities and interest expenses. As a result, the debt-to-equity ratio falls and the interest coverage ratio rises. The ratios Q and R stay unchanged because the decision has no effect on inventories, sales, or receivables.