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    Question

    In case of redemption of debentures, Debt/equity ratio

    will:
    A Increase Correct Answer Incorrect Answer
    B Decrease Correct Answer Incorrect Answer
    C Remains the same Correct Answer Incorrect Answer
    D It depends on the amount of debt Correct Answer Incorrect Answer

    Solution

    Redemption of debentures will reduce the overall debt of the company. Since Debt/Equity = Debt/Networth of the company, given no change in networth, a reduction in debt will also reduce the debt/equity ratio.

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