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?

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Definitions:

Labor

The physical and mental effort used in the production of goods and services.

Good

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Circumstances

A fact or condition connected with or relevant to an event or action, often influencing it or determining the outcomes.

Economic Theory

A set of principles and models that attempts to explain how economies operate and how economic agents interact.