Tissues and Co Has Elected to Issue Preference Shares to the Value

question 62

Multiple Choice

Tissues and Co has elected to issue preference shares to the value of $220 000.Prior to the share issue the company has assets of $780 000,liabilities of $370 000 and equity recorded at $410 000.The terms of the share issue state that these shares are non-redeemable but a guaranteed cumulative dividend of 8% of share value is payable.Calculate the debt-to-asset ratio immediately before and after the share issue.

• A) before-47.4%; after - 47.4%
• B) before-47.4%; after - 37%
• C) before-52.6%; after - 63%
• D) before-47.4%; after - 59%

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Definitions:

Optimal Quantity

The amount of a good or service that achieves the best balance between cost and benefit.

Sunk Cost

Expenses that have already been incurred and cannot be recovered, which should not influence current or future business decisions.

Save a Life

Save a Life refers to actions or interventions taken to prevent someone from dying.

Marginal Cost Curve

A graphical representation showing how the cost of producing one more unit of a good changes as production volume varies.