The Debt- Equitv Ratio of A' Ltd. is 1: 2. What is the effect of conversion of debentures into preference shares on this ratio?

The Debt- Equitv Ratio of A’ Ltd. is 1: 2. What is the effect of conversion of debentures into preference shares on this ratio?

Post category:Accountancy
Reading time:1 mins read

SOLUTION

Debt-equity ratio will decrease because conversion of debentures into preference shares will reduce the long-term debts but increase the shareholder’s funds.

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