A Company with Bond Debt of 80,lease Obligations of 20,total

question 58

Multiple Choice

A company with bond debt of 80,lease obligations of 20,total assets of 1,000,and total liabilities of 350 has a:

• A) total debt ratio of approximately .10.
• B) total debt ratio of approximately .23.
• C) long-term debt ratio of approximately .15.
• D) debt-to-equity ratio of approximately .15.

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Definitions:

Cost of Equity

The return a firm theoretically pays to its equity investors, i.e., shareholders, to compensate them for the risk of investing in the company.

Pre-tax Cost

The cost of an investment or expense before the application of taxes, representing the gross expense.

Market Price

The rate at present for the purchase or sale of a service or asset.

Preferred Stock

A class of ownership in a corporation that has a higher claim on its assets and earnings than common stock, often with dividends that are paid out before those to common shareholders.