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Post buy-back, the debt-equity ratio (Debt : Paid-up Capital + Free Reserves) shall NOT exceed:
A1:1
B3:1
C2:1
D5:1
Answer & Solution
Correct answer: C. 2:1
1. Step 1: Sec 68(2)(e) requires post-buy-back debt ≤ 2 × (paid-up capital + free reserves).
2. Step 2: This is the "Debt-Equity Ratio Test".
3. Step 3: Hence (B).
_Source: ICAI BoS CA Inter Paper 1, Ch 12 "Buy-Back of Securities"_