Saffron Industries Most Recent Balance Sheet Reports Total Assets of $42,000,000,total

question 183

Multiple Choice

Saffron Industries most recent balance sheet reports total assets of $42,000,000,total liabilities of $16,000,000 and stockholders' equity of $26,000,000.Management is considering using $3,000,000 of excess cash to prepay $3,000,000 of outstanding bonds.What effect,if any,would prepaying the bonds have on the company's debt-to-equity ratio?

• A)Prepaying the debt would cause the firm's debt-to-equity ratio to improve from .62 to .50.
• B)Prepaying the debt would cause the firm's debt-to-equity ratio to improve from .62 to .57.
• C)Prepaying the debt would cause the firm's debt-to-equity ratio to worsen from .62 to .50.
• D)Prepaying the debt would cause the firm's debt-to-equity ratio to worsen from .62 to .57.
• E)Prepaying the debt would cause the firm's debt-to-equity ratio to remain unchanged.

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Definitions:

Bodily Kinesthetic Intelligence

One of Howard Gardner's multiple intelligences, referring to the capacity to manipulate objects and use physical skills effectively, often seen in athletes and dancers.

Howard Gardner

An American developmental psychologist best known for his theory of multiple intelligences, proposing that people have different kinds of intelligences.

Athlete

An individual who competes in sports or engages in physical exercise regularly.

Spatial Intelligence

The ability to visualize, manipulate, and analyze objects and their spatial relationships in the mind.