Pension assumption change related D/E ratio adjustment

[h21]

I was reading EOC and it seems question like this come up often, say the text give you an obligation sum increase and expense increase after increasing salary increase rate by 1%, then ask you how would the D/E ratio change. In the question you will be presented with current debt and equity.
The answer shows you add the obligation increase amount to current total liability and decrease the same amounnt from current equity. I am confused as why you deduct the same amount of obligation change in equity, in that case equity + liability = not change, if I change the assumption isnt by total asset suppose to be different? shouldnt I decrease another different amount in equity?

 

[cpk123]

asset - liability = equity.
if liability increases by x - equity decreases by x too doesn’t it, if the equity remains the same.
So originally say A = 100, L = 90
E then = 10 (100 - 90)
say L increased by 2
So now Liab = 92
100 - 92 = 8 which is = 10 -2
does that help clarify?

 

[S2000magician]

h21 wrote:I was reading EOC and it seems question like this come up often, say the text give you an obligation sum increase and expense increase after increasing salary increase rate by 1%, then ask you how would the D/E ratio change. In the question you will be presented with current debt and equity.

An increase in expenses reduces net income, which, in turn, reduces retained earnings, reducing equity.