Homework Answers
The correct answer is Option 1.
Reason -
The debt-to-equity ratio (D/E) is a key financial ratio that provides a more direct comparison of debt financing to equity financing. This ratio is also an indicator of a company's ability to meet outstanding debt obligations. Again, a lower ratio value is preferred as this indicates the company is financing operations through its own resources rather than taking on debt. Companies with stronger equity positions are typically better equipped to weather temporary downturns in revenue or unexpected needs for additional capital investment. Higher D/E ratios may negatively impact a company's ability to secure additional financing when needed.
Since the debt equity ratio of Jackson, Inc. is higher it has the greatest financial risk.
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QUESTION 24 The debt to equity ratio of four companies is given below. Debt to equity...
1. Refer to the following list of liability balances at December 31, 2019. Accounts Payable $...
1. Refer to the following list of liability balances at December 31, 2019. Accounts Payable $ 18,000 Employee Health Insurance Payable 1,350 Employee Income Tax Payable 1,300 Estimated Warranty Payable (Due 2020) 1,300 Longminus−Term Notes Payable (Due 2022) 37,000 FICAlong dash—OASDI Taxes Payable 1,060 Sales Tax Payable 670 Mortgage Payable (Due 2023) 12,000 Bonds Payable (Due 2024) 56,000 Current Portion of Longminus−Term Notes Payable 6,500 What is the total amount of longminus−term liabilities? A 49000 B 93000 C 37000 D...
Which of the following statements is true of the debt to equity ratio? A. The higher the debt to equity ratio, the gre...
Which of the following statements is true of the debt to equity ratio? A. The higher the debt to equity ratio, the greater the company's financial risk. B. If the debt to equity ratio is less than 1, the company is financing more assets with debt than with equity. C. If the debt to equity ratio is greater than 1, the company is financing more assets with equity than with debt. D. The higher the debt to equity ratio, the...
4. Debt (or financial leverage) management ratios Companies have the opportunity to use varying amounts of...
4. Debt (or financial leverage) management ratios Companies have the opportunity to use varying amounts of different sources of financing to acquire their assets, including internal and external sources, and debt (borrowed) and equity funds. Aunt Dottie's Linen Inc. reported no long-term debt in its most recent balance sheet. A company with no debt on its books is referred to as: O a company with no financial leverage, or an unleveraged company O a company with financial leverage, or a...
5. More on debt management ratios Aa Aa E The extent of financial leverage in a...
5. More on debt management ratios Aa Aa E The extent of financial leverage in a firmm Debt ratios measure the proportion of total assets financed by a firm's creditors Shoe Barn Inc. has a debt-to-equity ratio of 2.60, compared to the industry average of 2.08. Its competitor Heally Corp., however, has a debt-to-equity ratio of 3.90. Based on what debt-to-equity ratios imply, which of the following statements is true? O Heally Corp. has higher creditworthiness as compared to Shoe...
The cash ratios of four companies are listed below. Company Cash Ratio Juan Corp 0.22 Rose,...
The cash ratios of four companies are listed below. Company Cash Ratio Juan Corp 0.22 Rose, Inc 0.15 Freelance, Inc 0.16 Pioneer Corp 0.28 Which company has the highest ability to repay its current liabilities? A. Juan Corp. OB. Rose, Inc. O C. Pioneer Corp OD. Freelance, Inc. Click to select your answer
Which company has a riskier financial structure? a. Compute the debt-to-equity ratio for each of the...
Which company has a riskier financial
structure?
a. Compute the debt-to-equity ratio for each of the following companies. Atlanta Company Total liabilities $ 429,000 Total equity 572,000 Spokane Company 549,000 1,830,000 $ Debt to equity ratio Choose Numerator: 1 Choose Denominator: = Debt-to-equity ratio Atlanta Company Spokane Company
The following information was drawn from the balance sheets of two companies: Company Assets = Liabilities...
The following information was drawn from the balance sheets of
two companies:
Company
Assets
=
Liabilities
+
Equity
East
207,000
78,000
129,000
West
606,000
158,000
448,000
Required
a. Compute the debt-to-assets ratio to measure the
level of financial risk of both companies.
b. Compare the two ratios computed in requirement
a to identify which company has the higher level of financial
risk.
East 207,000 606,000 78,000 158,000 129,000 448,000 West Required a. Compute the debt-to-assets ratio to measure the level...
Problem 10-6A Applying the debt-to-equity ratio LO A3 At the end of the current year, the...
Problem 10-6A Applying the debt-to-equity ratio LO A3 At the end of the current year, the following information is available for both Pulaski Company and Scott Company. Pulaski Company $2,348,000 Scott Company $1,217,000 Total assets Total liabilities Total equity 811,000 1,537,000 505,000 712,000 Required: 1. Compute the debt-to-equity ratios for both companies. 2. Which company has the riskier financing structure? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the debt-to-equity ratios for...
QUESTION 21 Trico Windshield Wipers Corporation has a 24% return on equity. The debt ratio is...
QUESTION 21 Trico Windshield Wipers Corporation has a 24% return on equity. The debt ratio is 35%. If the total asset turnover is 1.5X, what is the firm's profit margin? 13.85% 11.31% 14.25% 10.40% none of these
Question 8 (of 12) > В. value: 10.00 points Fyre, Inc., has a target debt-equity ratio...
Question 8 (of 12) > В. value: 10.00 points Fyre, Inc., has a target debt-equity ratio of 1.50. Its WACC is 9.7 percent, and the tax rate is 40 percent a. If the company's cost of equity is 14 percent, what is its pretax cost of debt? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of debt 11.39 % b. If instead you know that the aftertax cost of...
4. Debt (or financial leverage) management ratios Companies have the opportunity to use varying amounts of different sources of financing to acquire their assets, including internal and external sources, and debt (borrowed) and equity funds. Aunt Dottie's Linen Inc. reported no long-term debt in its most recent balance sheet. A company with no debt on its books is referred to as: O a company with no financial leverage, or an unleveraged company O a company with financial leverage, or a...
5. More on debt management ratios Aa Aa E The extent of financial leverage in a firmm Debt ratios measure the proportion of total assets financed by a firm's creditors Shoe Barn Inc. has a debt-to-equity ratio of 2.60, compared to the industry average of 2.08. Its competitor Heally Corp., however, has a debt-to-equity ratio of 3.90. Based on what debt-to-equity ratios imply, which of the following statements is true? O Heally Corp. has higher creditworthiness as compared to Shoe...
The cash ratios of four companies are listed below. Company Cash Ratio Juan Corp 0.22 Rose, Inc 0.15 Freelance, Inc 0.16 Pioneer Corp 0.28 Which company has the highest ability to repay its current liabilities? A. Juan Corp. OB. Rose, Inc. O C. Pioneer Corp OD. Freelance, Inc. Click to select your answer
Which company has a riskier financial
structure?
a. Compute the debt-to-equity ratio for each of the following companies. Atlanta Company Total liabilities $ 429,000 Total equity 572,000 Spokane Company 549,000 1,830,000 $ Debt to equity ratio Choose Numerator: 1 Choose Denominator: = Debt-to-equity ratio Atlanta Company Spokane Company
The following information was drawn from the balance sheets of
two companies:
Company
Assets
=
Liabilities
+
Equity
East
207,000
78,000
129,000
West
606,000
158,000
448,000
Required
a. Compute the debt-to-assets ratio to measure the
level of financial risk of both companies.
b. Compare the two ratios computed in requirement
a to identify which company has the higher level of financial
risk.
East 207,000 606,000 78,000 158,000 129,000 448,000 West Required a. Compute the debt-to-assets ratio to measure the level...
Problem 10-6A Applying the debt-to-equity ratio LO A3 At the end of the current year, the following information is available for both Pulaski Company and Scott Company. Pulaski Company $2,348,000 Scott Company $1,217,000 Total assets Total liabilities Total equity 811,000 1,537,000 505,000 712,000 Required: 1. Compute the debt-to-equity ratios for both companies. 2. Which company has the riskier financing structure? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the debt-to-equity ratios for...
QUESTION 21 Trico Windshield Wipers Corporation has a 24% return on equity. The debt ratio is 35%. If the total asset turnover is 1.5X, what is the firm's profit margin? 13.85% 11.31% 14.25% 10.40% none of these
Question 8 (of 12) > В. value: 10.00 points Fyre, Inc., has a target debt-equity ratio of 1.50. Its WACC is 9.7 percent, and the tax rate is 40 percent a. If the company's cost of equity is 14 percent, what is its pretax cost of debt? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of debt 11.39 % b. If instead you know that the aftertax cost of...
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