Question

PQR Ltd has the following information. Accounts Analyst has been asked to submit the report of the basis of given information 2020-21 2019-20 2018-19 Total Debt (Rs) 500000 450000 370000 Total Equity(Rs) 800000 870000 900000 What will the Analyst conclude in his/her report?

Q: Answer-PQR Ltd has the following information. Accounts Analyst has been asked to submit the report of the b...

Debt to equity ratio signifies the solvency of a firm. If debt to equity increases it puts a company in a difficult situation as interest on debt is a mandatory payment which has to be paid irrespective of the profits made. Therefore, this ratio determines the solvency position of a firm. If it increases, it makes the firm less solvent.

A The company is becoming less solvent as evidenced by the increase in its debt-to-equity ratio from 0.411 to 0.625 from 2018-19 to 2020-21

B The company is becoming less liquid as evidenced by the increase in its debt-to-equity ratio from 0.411 to 0.625 from 2018-19 to 2020-21

C The company is becoming less profitable as evidenced by the increase in its debt-to-equity ratio from 0.411 to 0.625 from 2018-19 to 2020-21

D The company is becoming more solvent as evidenced by the increase in its debt-to-equity ratio from 0.411 to 0.625 from 2018-19 to 2020-21

E Nothing can be inferred from the above information

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PQR Ltd has the following information. Accounts Analyst has been asked to submit the report of the basis of given information 2020-21 2019-20 2018-19 Total Debt (Rs) 500000 450000 370000 Total Equity(Rs) 800000 870000 900000 What will the Analyst conclude in his/her report?

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