Repayment of long-term borrowings of ₹40000 make what effect on the debt-equity ratio (1:2)?

Decline

 Debt-Equity Ratio is given as 1 : 2, therefore, it may be assumed that Long term Debts are  ₹1,00,000 and Shareholder's Funds are ₹2,00,000.
By the repayment of Long term Borrowings of ₹40,000, Long-term Debts will reduced by ₹40,000, and these will stand at 1,00,000 - ₹40,000 = ₹60,000.
So, the revised ratio will be : 60,000/200000= 0.3:1.
Before the repayment of Long term Borrowings, the ratio was 1: 2 (or 0.5: 1) is now reduced to 0.3: 1. It means that the ratio has decreased. Therefore, it can be concluded that a decrease in long-term debts decreases this ratio.