Purchase Solution

Debt Ratio

Not what you're looking for?

Ask Custom Question

The Altman Company has a debt ratio of 33.33 percent, and it needs to raise $100,000 to expand. Management feels that an optimal debt ratio would be 16.67 percent. Sales are currently $750,000, and the total assets turnover is 7.5. How should the expansion be financed so as to produce the desired debt ratio?

a. 100% equity
b. 100% debt
c. 20 percent debt, 80 percent equity
d. 40 percent debt, 60 percent equity
e. 50 percent debt, 50 percent equity

Purchase this Solution
Solution Summary

This solution looks at financing decisions in order to achieve the optimal debt ratio.

Solution Preview

Answer: A

Total asset turnover = net sales/total assets, therefore total assets = net sales/total asset turnover.
Current total assets = $750,000/7.5 = ...

Purchase this Solution
Free BrainMass Quizzes
Income Streams

In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.

MS Word 2010-Tricky Features

These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.

Change and Resistance within Organizations

This quiz intended to help students understand change and resistance in organizations

Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

Learning Lean

This quiz will help you understand the basic concepts of Lean.

View More Free Quizzes
Related BrainMass Solutions

  • Which the following are factors in determining a company's c

    Its loans outstanding, dividend payout ratio, free cash flow, and debt-equity ratio Its debt-equity ratio, current ratio, and free cash flow Its interest coverage ratio, debt-asset ratio, and default risk ratio Its annual interest payments

  • Extra Space Storage Short Term and Long Term Liabilities

    A debt ratio less than 1 means that PSA more assets than debt. A low debt ratio means that PSA is not a credit risk.

  • Debt-to-Equity Ratio for Phoenix Company

    debt ratio, debt equity ratio and reduction in tie.

  • Calculating and Assessing Debt Ratio for Apple, Inc.

    11,786)) (Long Term^1 )Debt Ratio= .198 Debt/Equity Ratio= (Total Liabilities)/(Shareholders Equity) Debt/Equity Ratio= 39,756/47,791 Debt/Equity Ratio= .832 (Short Term)Debt/Equity Ratio= 27,970/47,791 (Short Term)Debt/Equity Ratio= .585 (Long

  • Market capitalization, book debt-equity ratio

    What was GE's book debt-equity ratio? What was GE's market debt-equity ratio?

  • Short term loans expected to be refinanced

    Compute the following ratio value current ratio debt to equity ratio debt ratio So, my question is due I include the short term payable as current or not?

  • Debt ratio

    Debt ratio = Total debt/total assets The present debt ratio is 33.33%, implies debt is 33,333 and equity is 66,667.

  • Determining Optimal Capital Structure

    Debt Ration = 50% Equity Ratio = 50% b. Debt Ratio= 40% equity Ratio= 60% c. Debt Ratio= 70% Equity Ratio= 30% d. Debt Ratio= 30% Equity Ratio= 70% e. Debt Ratio= 60% Equity Ratio= 40% Hi, Get the answer with the attachment.

  • Higher debt-to-equity ratio

    Debt to equity ratio is calculated by : Debt/Equity This measures the long term solvency of the organization. Lower debt equity ratio indicates lower financial risk. Bank will prefer the organization to have lower debt equity ratio.

  • Ratio calculation

    Over this period what was the change in GEs a. market capitalization b. market to book ratio c. book debt equity ratio d. market debt equity ratio c. enterprise value 2.

View More Related Solutions