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Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:
Assertion (A): Debt to Equity Ratio of 2 : 1 is considered satisfactory. Generally a Low Ratio is considered favourable.
Reason (R): This ratio indicates the proportionate claims of owners and outsiders on a firm's assets. High Ratio shows claims of outsiders are greater but Low Ratio shows outsiders claims are less.
- a)Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
- b)Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
- c)Assertion (A) is true, but Reason (R) is false .
- d)Assertion (A) is false, but Reason (R) is true.
Correct answer is option 'A'. Can you explain this answer?
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Directions : In the following questions, a statement of Assertion (A)...
Debt equity ratio is calculated as Total outside liabilities/ Shareholders equity and so it can be said that it is the relationship between outsiders fund and shareholders funds.
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Directions : In the following questions, a statement of Assertion (A)...
Assertion (A): Debt to Equity Ratio of 2 : 1 is considered satisfactory. Generally a Low Ratio is considered favourable.
Reason (R): This ratio indicates the proportionate claims of owners and outsiders on a firm's assets. High Ratio shows claims of outsiders are greater but Low Ratio shows outsiders claims are less.
The given Assertion (A) states that a Debt to Equity Ratio of 2:1 is considered satisfactory, while a low ratio is considered favorable. The Reason (R) provided is that this ratio indicates the proportionate claims of owners and outsiders on a firm's assets. A high ratio shows that the claims of outsiders are greater, while a low ratio shows that the claims of outsiders are less.
Explanation:
Debt to Equity Ratio:
The debt to equity ratio is a financial ratio that compares a company's total debt to its shareholders' equity. It is a measure of the company's financial leverage and indicates the proportion of financing provided by the company's creditors (debt) compared to the financing provided by the company's owners (equity).
Interpretation of Debt to Equity Ratio:
- A Debt to Equity Ratio of 2:1 means that the company has twice as much debt as equity. This indicates that the company relies more on debt financing than on equity financing.
- A low Debt to Equity Ratio indicates that the company has a smaller proportion of debt compared to equity. This suggests that the company relies more on equity financing and has lower financial risk.
- A high Debt to Equity Ratio indicates that the company has a larger proportion of debt compared to equity. This suggests that the company relies more on debt financing and has higher financial risk.
Analysis:
The Assertion (A) states that a Debt to Equity Ratio of 2:1 is considered satisfactory. This means that the company has a balanced mix of debt and equity financing, indicating a moderate level of financial risk. A ratio lower than 2:1 would be even more favorable as it suggests a lower level of debt and lower financial risk.
The Reason (R) provided explains the significance of the Debt to Equity Ratio. It states that the ratio indicates the proportionate claims of owners and outsiders on a firm's assets. A high ratio implies that the claims of outsiders (creditors) are greater, indicating higher financial risk. On the other hand, a low ratio implies that the claims of outsiders are less, indicating lower financial risk.
Conclusion:
Both the Assertion (A) and Reason (R) are true, and the Reason (R) is the correct explanation of the Assertion (A). A Debt to Equity Ratio of 2:1 is considered satisfactory, and a low ratio is considered favorable as it indicates a lower level of debt and lower financial risk. The Reason (R) explains that the ratio reflects the proportionate claims of owners and outsiders on a firm's assets, with a high ratio indicating greater claims of outsiders and a low ratio indicating lesser claims of outsiders.
Reason (R): This ratio indicates the proportionate claims of owners and outsiders on a firm's assets. High Ratio shows claims of outsiders are greater but Low Ratio shows outsiders claims are less.
The given Assertion (A) states that a Debt to Equity Ratio of 2:1 is considered satisfactory, while a low ratio is considered favorable. The Reason (R) provided is that this ratio indicates the proportionate claims of owners and outsiders on a firm's assets. A high ratio shows that the claims of outsiders are greater, while a low ratio shows that the claims of outsiders are less.
Explanation:
Debt to Equity Ratio:
The debt to equity ratio is a financial ratio that compares a company's total debt to its shareholders' equity. It is a measure of the company's financial leverage and indicates the proportion of financing provided by the company's creditors (debt) compared to the financing provided by the company's owners (equity).
Interpretation of Debt to Equity Ratio:
- A Debt to Equity Ratio of 2:1 means that the company has twice as much debt as equity. This indicates that the company relies more on debt financing than on equity financing.
- A low Debt to Equity Ratio indicates that the company has a smaller proportion of debt compared to equity. This suggests that the company relies more on equity financing and has lower financial risk.
- A high Debt to Equity Ratio indicates that the company has a larger proportion of debt compared to equity. This suggests that the company relies more on debt financing and has higher financial risk.
Analysis:
The Assertion (A) states that a Debt to Equity Ratio of 2:1 is considered satisfactory. This means that the company has a balanced mix of debt and equity financing, indicating a moderate level of financial risk. A ratio lower than 2:1 would be even more favorable as it suggests a lower level of debt and lower financial risk.
The Reason (R) provided explains the significance of the Debt to Equity Ratio. It states that the ratio indicates the proportionate claims of owners and outsiders on a firm's assets. A high ratio implies that the claims of outsiders (creditors) are greater, indicating higher financial risk. On the other hand, a low ratio implies that the claims of outsiders are less, indicating lower financial risk.
Conclusion:
Both the Assertion (A) and Reason (R) are true, and the Reason (R) is the correct explanation of the Assertion (A). A Debt to Equity Ratio of 2:1 is considered satisfactory, and a low ratio is considered favorable as it indicates a lower level of debt and lower financial risk. The Reason (R) explains that the ratio reflects the proportionate claims of owners and outsiders on a firm's assets, with a high ratio indicating greater claims of outsiders and a low ratio indicating lesser claims of outsiders.
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Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:Assertion (A): Debt to Equity Ratio of 2 : 1 is considered satisfactory. Generally a Low Ratio is considered favourable.Reason (R): This ratio indicates the proportionate claims of owners and outsiders on a firm's assets. High Ratio shows claims of outsiders are greater but Low Ratio shows outsiders claims are less.a)Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).b)Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).c)Assertion (A) is true, but Reason (R) is false .d)Assertion (A) is false, but Reason (R) is true.Correct answer is option 'A'. Can you explain this answer?
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Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:Assertion (A): Debt to Equity Ratio of 2 : 1 is considered satisfactory. Generally a Low Ratio is considered favourable.Reason (R): This ratio indicates the proportionate claims of owners and outsiders on a firm's assets. High Ratio shows claims of outsiders are greater but Low Ratio shows outsiders claims are less.a)Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).b)Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).c)Assertion (A) is true, but Reason (R) is false .d)Assertion (A) is false, but Reason (R) is true.Correct answer is option 'A'. Can you explain this answer? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:Assertion (A): Debt to Equity Ratio of 2 : 1 is considered satisfactory. Generally a Low Ratio is considered favourable.Reason (R): This ratio indicates the proportionate claims of owners and outsiders on a firm's assets. High Ratio shows claims of outsiders are greater but Low Ratio shows outsiders claims are less.a)Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).b)Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).c)Assertion (A) is true, but Reason (R) is false .d)Assertion (A) is false, but Reason (R) is true.Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:Assertion (A): Debt to Equity Ratio of 2 : 1 is considered satisfactory. Generally a Low Ratio is considered favourable.Reason (R): This ratio indicates the proportionate claims of owners and outsiders on a firm's assets. High Ratio shows claims of outsiders are greater but Low Ratio shows outsiders claims are less.a)Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).b)Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).c)Assertion (A) is true, but Reason (R) is false .d)Assertion (A) is false, but Reason (R) is true.Correct answer is option 'A'. Can you explain this answer?.
Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:Assertion (A): Debt to Equity Ratio of 2 : 1 is considered satisfactory. Generally a Low Ratio is considered favourable.Reason (R): This ratio indicates the proportionate claims of owners and outsiders on a firm's assets. High Ratio shows claims of outsiders are greater but Low Ratio shows outsiders claims are less.a)Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).b)Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).c)Assertion (A) is true, but Reason (R) is false .d)Assertion (A) is false, but Reason (R) is true.Correct answer is option 'A'. Can you explain this answer? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:Assertion (A): Debt to Equity Ratio of 2 : 1 is considered satisfactory. Generally a Low Ratio is considered favourable.Reason (R): This ratio indicates the proportionate claims of owners and outsiders on a firm's assets. High Ratio shows claims of outsiders are greater but Low Ratio shows outsiders claims are less.a)Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).b)Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).c)Assertion (A) is true, but Reason (R) is false .d)Assertion (A) is false, but Reason (R) is true.Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:Assertion (A): Debt to Equity Ratio of 2 : 1 is considered satisfactory. Generally a Low Ratio is considered favourable.Reason (R): This ratio indicates the proportionate claims of owners and outsiders on a firm's assets. High Ratio shows claims of outsiders are greater but Low Ratio shows outsiders claims are less.a)Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).b)Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).c)Assertion (A) is true, but Reason (R) is false .d)Assertion (A) is false, but Reason (R) is true.Correct answer is option 'A'. Can you explain this answer?.
Solutions for Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:Assertion (A): Debt to Equity Ratio of 2 : 1 is considered satisfactory. Generally a Low Ratio is considered favourable.Reason (R): This ratio indicates the proportionate claims of owners and outsiders on a firm's assets. High Ratio shows claims of outsiders are greater but Low Ratio shows outsiders claims are less.a)Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).b)Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).c)Assertion (A) is true, but Reason (R) is false .d)Assertion (A) is false, but Reason (R) is true.Correct answer is option 'A'. Can you explain this answer? in English & in Hindi are available as part of our courses for Commerce.
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Here you can find the meaning of Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:Assertion (A): Debt to Equity Ratio of 2 : 1 is considered satisfactory. Generally a Low Ratio is considered favourable.Reason (R): This ratio indicates the proportionate claims of owners and outsiders on a firm's assets. High Ratio shows claims of outsiders are greater but Low Ratio shows outsiders claims are less.a)Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).b)Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).c)Assertion (A) is true, but Reason (R) is false .d)Assertion (A) is false, but Reason (R) is true.Correct answer is option 'A'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of
Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:Assertion (A): Debt to Equity Ratio of 2 : 1 is considered satisfactory. Generally a Low Ratio is considered favourable.Reason (R): This ratio indicates the proportionate claims of owners and outsiders on a firm's assets. High Ratio shows claims of outsiders are greater but Low Ratio shows outsiders claims are less.a)Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).b)Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).c)Assertion (A) is true, but Reason (R) is false .d)Assertion (A) is false, but Reason (R) is true.Correct answer is option 'A'. Can you explain this answer?, a detailed solution for Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:Assertion (A): Debt to Equity Ratio of 2 : 1 is considered satisfactory. Generally a Low Ratio is considered favourable.Reason (R): This ratio indicates the proportionate claims of owners and outsiders on a firm's assets. High Ratio shows claims of outsiders are greater but Low Ratio shows outsiders claims are less.a)Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).b)Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).c)Assertion (A) is true, but Reason (R) is false .d)Assertion (A) is false, but Reason (R) is true.Correct answer is option 'A'. Can you explain this answer? has been provided alongside types of Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:Assertion (A): Debt to Equity Ratio of 2 : 1 is considered satisfactory. Generally a Low Ratio is considered favourable.Reason (R): This ratio indicates the proportionate claims of owners and outsiders on a firm's assets. High Ratio shows claims of outsiders are greater but Low Ratio shows outsiders claims are less.a)Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).b)Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).c)Assertion (A) is true, but Reason (R) is false .d)Assertion (A) is false, but Reason (R) is true.Correct answer is option 'A'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:Assertion (A): Debt to Equity Ratio of 2 : 1 is considered satisfactory. Generally a Low Ratio is considered favourable.Reason (R): This ratio indicates the proportionate claims of owners and outsiders on a firm's assets. High Ratio shows claims of outsiders are greater but Low Ratio shows outsiders claims are less.a)Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).b)Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).c)Assertion (A) is true, but Reason (R) is false .d)Assertion (A) is false, but Reason (R) is true.Correct answer is option 'A'. Can you explain this answer? tests, examples and also practice Commerce tests.
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