What will be the effect on the debt(1,00,000)-equity (2,00,000) ratio which is 1:2, if a fixed asset is purchased for ₹50,000 on a long-term deferred basis and what will be the newly revised ratio? 

Improve, 0.75:1

The correct answer is option 1- Improve, 0.75:1.

Debt-Equity Ratio is given as 1 : 2.
Long term Debts are  ₹1,00,000
Shareholder's Funds are ₹2,00,000.

As a result of the credit purchase of a fixed asset for ₹50,000 on long-term payment basis, long term debts will increase by ₹50,000, and these will stand at 1,00,000 + 50,000 = ₹1,50,000. There is no affect on equity. Therefore, the revised ratio will be :

1,50,000/2,00,000 = 0.75:1

So,before the purchase of fixed asset, the ratio was 1 : 2 (or .5 : 1) which now stands 0.75:1. It means that the ratio has increased.