You are a debenture holder of ‘B Ltd’. Mention any two ratios that you will compute to examine whether your decision was satisfied​

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Answer:

Companies repay the borrowings at a fixed rate of interest to the debenture holders. Shareholders get a return by dividend payment. In case of debentures, the holders get interest regardless of the profit of the company. Shareholders' payments are made from the profit earned by the concerned company.

We are the debenture holder of 'B Ltd'.We are asked what ratio will compute to examine whether your decision was satisfied

  • By being a debenture holder we give our money to the money on some fixed rate of interest
  • So it is very important to know whether the company has money to pay us back or not
  • The company will only be able to pay us back if the company earns profits
  • So we need to calculate the profitability ratios before we take the decision of holding debentures of the company
  • So any two ratios which are asked can be Operating profit margin ratio and Net profit margin ratio          

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