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

question 91

Essay

A company had a debt-to-equity ratio of 1.55 before issuing convertible bonds. This ratio included $500,000 in equity. The company issued convertible bonds. The value reported for the bonds on the balance sheet is $180,000 and the conversion rights are valued at $22,000.
Required:
After the issuance of the convertible bonds, what is the value of the debt-to-equity ratio?

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Definitions:

Water Table

The upper surface of the zone of saturation in the ground, below which the soil, gravel, or rock is saturated with water.

Subsurface Material

Materials found beneath the Earth's surface, which can include soil, rock, liquids, and gases.

Groundwater Divide

A relatively high area of the water table, separating groundwater that flows in opposite directions.

Subsurface Material

Refers to the layer of soil, rock, and other materials that lie beneath the surface of the Earth.