Solution-Piece of equipment that can be leased or purchased

Piece of equipment that can be leased or purchased

Reference no: EM131054197

Connors Construction needs a piece of equipment that can be leased or purchased. The equipment costs $50. One option is borrow $50 from the local bank and use the money to buy the equipment. The other option is to lease the equipment. The company's balance sheet prior to the equipment purchase or lease is shown below:

Current assets	$200	Dept	$650
Fixed assets	750	Equity	300
Total assets	$950	Total liabilities and equity	$950

What would the company's debt ratio if it chose to purchase the equipment? Round your answer to one decimal.

The company's debt ratio is %.

What would be the company's debt ratio if it leased the equipment and it could keep the lease off its balance sheet? Round your answer to one decimal.

If the company leases the asset and does not capitalize the lease, its debt ratio is %.

Is the company's financial risk any different whether the equipment is leased or purchased? Explain.

Reference no: EM131054197

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Piece of equipment that can be leased or purchased : Connors Construction needs a piece of equipment that can be leased or purchased. The equipment costs $50. One option is borrow $50 from the local bank and use the money to buy the equipment. The other option is to lease the equipment. The company'..

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Piece of equipment that can be leased or purchased

Reference no: EM131054197

Reference no: EM131054197

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