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

Answer 1

Ratio will improve.

Reason – Capital Employed will decrease and Debt will remain the same.