Justin Company Has Total Assets, Liabilities, and Shareholders' Equity of $38,000

question 20

Multiple Choice

Justin Company has total assets, liabilities, and shareholders' equity of $38,000, $17,000, and $21,000, respectively, at the beginning of 2017. At the end of 2017, total assets, liabilities, and shareholders' equity were reported at $32,000, $13,000, and $19,000, respectively. How much additional debt can Justin Company incur and still have its debt/equity ratio remain less than or equal to 1.00?

• A)$10,000
• B)$25,000
• C)$12,000
• D)$24,000

---

Definitions:

Yields to Maturity

The total return anticipated on a bond if it is held until it matures, considering all interest payments and the principal repayment.

Yield to Maturity

The total return anticipated on a bond if the bond is held until it matures, considering both the interest payments received and any gain or loss if the bond is purchased at a discount or premium.

Coupon

A detachable portion of a bond that is given up in return for the periodic interest payments.

Interest Rates

The cost of borrowing money or the return on invested funds, typically expressed as a percentage.