1. In late 2018, Britannia Industries Ltd. (BIL) decided to issue bonus debentures to its shareholders. Their FY2018 balance sheet was facing a problem of plenty and it was using the bonus debentures to fix that. As on 31 March 2018, its cash and cash equivalents stood at Rs.1,044 crores 3.5 times up from a year ago. Free cash flow generated during the year was Rs.826 crores. As a result, the companys ROCE and ROE ratios had declined from a year ago. The ROCE reduced from 35.2% to 33% and ROE from 36.9% to 32.9%. The bonus debentures were to be issued for 3 years, carrying 8% interest per annum. Using just this information, answer the following questions.

1. Assume that the bonus debentures were issued on 1^st February 2019. Assuming quarterly interest payouts, illustrate the impact on the financial statements on 1^st February 2019, 31^st March 2019, 30^th April 2019 and 1^st February 2022, using the accounting identity.
2. Compute the two return ratios soon after the issue and after the redemption of the bonds, using the data provided and with any reasonable assumptions required. Hence, illustrate how the ROCE and ROE ratios can be improved with this financial engineering.

Do you think this method is better than if the company had simply paid a dividend with all the excess cash? Justify your answer.