An Entity Sells an Equal Dollar Amount of Convertible Preferred

question 29

Multiple Choice

An entity sells an equal dollar amount of convertible preferred stock and long-term notes payable.Prior to these transactions,total debt was less than total equity.How did the sale of the convertible preferred stock and the long-term notes payable affect the company's debt to total assets ratio?

• A) The debt to total assets ratio would decrease.
• B) The debt to total assets ratio would increase.
• C) The debt to total assets ratio would remain the same.
• D) The effect on the debt to total assets ratio cannot be determined from the information given.

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Definitions:

Hematocrit

The percentage of red blood cells in a volume of blood, used to diagnose and manage various medical conditions.

Hemoglobin

A protein in red blood cells that carries oxygen from the lungs to the body's tissues and returns carbon dioxide from the tissues back to the lungs.

Extravasation

Refers to the leakage of a fluid, often blood or drug solutions, from a vessel into the tissues surrounding it.

Hemochromatosis

A genetic disorder causing the body to absorb too much iron from the diet, leading to excess iron deposits in organs.