Instead of Increasing Its Long-Term Debt by Borrowing Money from a Bank

question 59

Multiple Choice

Instead of increasing its long-term debt by borrowing money from a bank to purchase new stereo equipment, Jay's Jams Inc.decides to lease the equipment on a long-term basis.How will the long-term debt ratio differ if the lease option is selected over the bank-debt option?

• A)the ratio will be lower under the leasing option.
• B)the ratio will be higher under the leasing option.
• C)the ratio will be the same regardless of the financing method selected.
• D)the ratio effects are unknown without the amount of the lease obligation.

---

Definitions:

Quality

Good or service that is free of deficiencies.

Prices

The amounts of money expected, required, or given in payment for something.

Dependability of Delivery

The reliability with which a company or supply chain delivers products or services to its customers in the promised time frame.

Competing Companies

Businesses that operate in the same market or industry and vie for the same customer base, market share, or resources.