A Company Had a Debt-To-Equity Ratio of 1

question 18

Essay

A company had a debt-to-equity ratio of 1.65 before issuing convertible bonds. This ratio included $450,000 in equity. The company issued convertible bonds. The value reported for the bonds on the balance sheet is $200,000 and the conversion rights are valued at $25,000.
Required:
After the issuance of the convertible bonds, what is the value of the debt-to-equity ratio?

---

Definitions:

Burden of a Tax

The economic impact of a tax on the welfare of buyers or sellers, often depending on the relative elasticities of demand and supply.

Taxable Income

The amount of an individual's or a company's income used to determine how much tax is owed to the government.

Progressive

Pertaining to a taxation system where the tax rate increases as the taxable amount increases, aiming for a more equitable distribution of wealth.

Inelastic

A characteristic of a good or service whose demand does not change significantly when its price changes.