Aradya Ltd. had an equity ratio of 2.5: 1. State which of the following transactions will not affect the Debt Equity Ratio:

₹2,00,000 paid to creditors

Debt-equity ratio = 2.5:1= Debt/equity. 
So lets assume Debt is ₹2500000 and equity is ₹1000000.

1) Purchase of ₹15,00,000 machinery by taking a bank loan of ₹12,00,000 = Due to this transaction debt is increased by ₹1200000. So, new debt is ₹3700000 and equity is still ₹1000000. So debt-equity ratio = 3700000/1000000 i.e. 3.7:1.

2) ₹2,00,000 paid to creditors = Due to this transaction current asset and current liability is decreased. So there is no effect on debt-equity ratio.

3) Conversion of ₹1,00,000 debentures into Equity shares of ₹100 each = Due to this transaction debt is decreased by ₹100000 and equity is increased by same amount. So new debt is ₹2400000 and Equity is ₹1100000. So, new debt-equity ratio is 2400000/1100000 i.e. 24:11

4) Sale of furniture (book value of ₹5,00,000) for ₹5,50,000 = Due to this transaction current asset is increased and fixed asset is decreased. But fixed asset is sold on profit of ₹50000, due to which shareholders funds is increased by this amount means equity increased by ₹50000. So no change in debt but equity is increased by ₹50000. So, new debt-equity ratio is 2500000/1050000 means 250:105 or 50: 21