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

question 46

Essay

A company had a debt-to-equity ratio of 1.64 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?


Definitions:

Binomial Distribution

A probability distribution describing the number of successes in a fixed number of binary, independent trials given a specific success probability.

Random Sample

A group selected from a broader population where every individual has the same likelihood of being chosen.

Uniformly Distributed

A type of distribution where all outcomes are equally likely; every variable has the same frequency or probability.

Assembling Product

The process of combining components or parts to build a complete product.

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