A high debt-equity ratio implies: MCQ with Answer and Explanation

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A high debt-equity ratio implies:

A. High financial risk

B. High profitability

C. No risk

D. Low financial risk

Answer: Option A

Solution (By JKSSB Mock Tests)

Higher debt means higher fixed interest obligations, increasing financial risk.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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Question #1

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In the absence of a Partnership Deed, what is the rate of interest on capital provided to partners?

A. No interest is allowed

B. 12% p.a.

C. 9% p.a.

D. 6% p.a.

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Correct Answer: Option A

Explanation:
According to the Indian Partnership Act, 1932, if there is no deed, no interest on capital is allowed to any partner.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

Question #2

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S1: The sacrificing ratio is always in the old profit-sharing ratio. S2: The gaining ratio is always in the new profit-sharing ratio. Which statement(s) is/are correct?

A. S1 only

B. S2 only

C. Both S1 and S2

D. Neither S1 nor S2

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Correct Answer: Option D

Explanation:
The sacrificing ratio is calculated as Old Ratio - New Ratio. The gaining ratio is calculated as New Ratio - Old Ratio. They are not necessarily the same as the old or new ratios unless specifically stated. Both are incorrect.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping