Seedly Corporation's Most Recent Balance Sheet Reports Total Assets of $35,000,000

question 76

Multiple Choice

Seedly Corporation's most recent balance sheet reports total assets of $35,000,000 and total liabilities of $17,500,000.Management is considering issuing $5,000,000 of par value bonds (at par) with a maturity date of ten years and a contract rate of 7%.What effect,if any,would issuing the bonds have on the company's debt-to-equity ratio?

• A)Issuing the bonds would cause the firm's debt-to-equity ratio to improve from 1.0 to 1.3.
• B)Issuing the bonds would cause the firm's debt-to-equity ratio to worsen from 1.0 to 1.3.
• C)Issuing the bonds would cause the firm's debt-to-equity ratio to remain unchanged.
• D)Issuing the bonds would cause the firm's debt-to-equity ratio to improve from .5 to .8.
• E)Issuing the bonds would cause the firm's debt-to-equity ratio to worsen from .5 to .8.

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Definitions:

Petty Cash Fund

A minor sum of money maintained in reserve for completing instant transactions for various minor costs.

Journalize

Recording financial transactions in the appropriate book of accounts, ensuring they are officially documented.

Replenishment

The process of filling up or restocking inventory or supplies to maintain required levels.

Petty Cash Fund

A small amount of cash kept on hand for minor, impromptu expenses.