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:

Wrongful Discharge

The unjust firing or termination of an employee in violation of legal or contractual terms.

Progressive Discipline

A process by which employees face increasingly severe consequences for their actions or failures in performance.

Employee Handbook

A manual or document issued by an employer to employees, containing company policies, procedures, and guidelines.

Register Securities

The process of documenting ownership of stocks or bonds with the appropriate regulatory body.