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The Debt Equity Ratio of a Company is 1: 2. State Whether 'Issue of Bonus Shares' Will Increase, Decrease Or Not Change the Debt Equity Ratio. - Accountancy

Sum

The Debt Equity ratio of a company is 1: 2. State whether 'Issue of bonus shares' will increase, decrease or not change the Debt Equity Ratio.

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Solution

Debt Equity Ratio = `"Debt"/"Equity"`

Issue of bonus shares will increase the value of equity thereby causing a decrease in the debt-equity ratio.

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