Which of the Following Is Correct for a Firm with a Debt-Equity

question 111

Multiple Choice

Which of the following is correct for a firm with a debt-equity ratio of .45 if long-term debt equals 500 and equity equals 2,000? The firm has:

• A)Current liabilities that is valued at 400
• B)Current assets that is valued at 400
• C)Retained earnings that are valued at 900
• D)preferred stock of 400 Total Debt = Current Debt + Long Term Debt
• Debt/Equity Ratio = .45
• Therefore, Debt/Equity Ratio x Shareholder Equity = Value of Total Debt
• )45 x 2,000 = 900 Total Debt
• Therefore, if Total Debt = 900 = Current Debt + Long Term Debt
• 900 = Current Debt + 500

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Definitions:

SSE

The overall sum of errors squared, highlighting the divergence between a model's predictions and real-world data observations.

Least Squares Estimate

A method in statistics for estimating the best-fitting line to a set of points by minimizing the sum of the squares of the differences between the observed values and the values provided by the model.

Slope

This term describes the rate at which a line ascends or descends, calculated as the change in the y-axis divided by the change in the x-axis for any two points on the line.

Coefficient Of Determination

A statistical measure, denoted as R², that represents the proportion of the variance for a dependent variable that's explained by an independent variable(s) in a regression model.