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

question 87

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

Understand the importance and basics of ISO 9000 standards in the global business context.

Identify the key aspects and benefits of quality control in business operations.

Recognize the principles and benefits of continuous improvement strategies in organizations.

Understand the concept of internal and external customers and their significance in business operations.

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Definitions:

Temporary Accounts

Accounts that are closed at the end of each accounting period; examples include revenue, expense, and dividend accounts.

Owner's Capital Account

An account that represents the total equity or ownership interest of the owner(s) in a business, reflecting contributions and withdrawals.

Closing Entries

Entries recorded at the conclusion of an accounting cycle to shift balances from temporary to permanent accounts.

Ledger

A book or other collection of financial accounts where all transactions are summarized and recorded.