A Firm Has Assets of $240 Million, of Which $24

question 56

Multiple Choice

A firm has assets of $240 million, of which $24 million is cash. It has debt of $96 million. If the firm were to repurchase $9.6 million of its stock, what would its new debt-to-equity ratio be?

• A)142.86%
• B)71.43%
• C)35.71%
• D)85.71%

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Definitions:

Treasuries

Government debt securities issued by the United States Department of the Treasury to finance government spending as an alternative to taxation.

Factoring Receivables

Selling receivables to a financing source for an amount less than their face value.

Financial Organization

An entity that provides financial services such as investments, insurance, banking, or brokerage services.

Uncollectible Accounts

Debts owed to a company that are considered to be uncollectible from debtors or customers, often written off as bad debts.