What will be the effect of the payment of dividends payable on the debt-equity ratio which stands at 1:2?

No Change

The payment of dividends payable will have no effect on the debt-equity ratio. The debt-equity ratio is a financial metric that compares a company's total debt (long-term and short-term liabilities) to its shareholders' equity. The formula for the debt-equity ratio is: Debt-Equity Ratio = Total Debt / Shareholders' Equity Dividends payable is a current liability that represents dividends declared by a company but not yet paid to shareholders. When the dividends payable are actually paid, it involves a transfer of cash from the company to its shareholders, but it does not impact the company's total debt or shareholders' equity. Since the payment of dividends payable does not affect the company's debt or equity, the debt-equity ratio will remain unchanged. The ratio will still represent the same proportion of debt to equity in the company as it did before the dividend payment.