What would be the companys debt ratio

Assignment Help Financial Accounting
Reference no: EM13529382

Reynolds Construction needs a piece of equipment that costs $200. Reynolds can either lease the equipment or borrow $200 from a local bank and buy the equipment. If the equipment is leased, the lease would not have to be capitalized. Reynolds"s balance sheet prior to the acquisition of the equipment is as follows:

Current assets

$300

Debt

$400

Net fixed assets

500

Equity

400

Total assets

$800

Total claims

$800

a. (1) What is Reynolds"s current debt ratio?

(2) What would be the company"s debt ratio if it purchased the equipment?

(3) What would be the debt ratio if the equipment were leased?

b. Would the company"s financial risk be different under the leasing and purchasing alternatives?

Reference no: EM13529382

Questions Cloud

Explain how to calculate the maximum mass of cu : In an electrolytic cell, Cu(s) is produced by the electrolysis of CuSO4(aq). Calculate the maximum mass of Cu(s) that can be deposited by a direct current of 100. amperes passed through 5.00 L of 2.00 M CuSO4(aq) for a period of 1.00 hour.
What is the nal of the lease : Big Sky Mining has no use for the machine beyond the expiration of the lease, and the machine has an estimated residual value of $250,000 at the end of the 4th year. What is the NAL of the lease?
Glucose from the metabolites of aminoacids : Canmammals synthesize glucose from the metabolites of aminoacids? From the metabolites of lipids? What ramifications does this have on mammal diet?
Obtain the speed of the clay immediately before impact : A 11.0-g wad of sticky clay is hurled horizontally at a 110-g wooden block initially at rest on a horizontal surface. The clay sticks to the block. obtain the speed of the clay immediately before impact
What would be the companys debt ratio : What would be the companys debt ratio if it purchased the equipment and what would be the debt ratio if the equipment were leased?
Calculate how far away does the ball land : A football is kicked from the ground with a velocity of 38 m/s at an angle of 40 degrees and eventually lands at the same height. How far away does the ball land
Catabolism is convergent and anabolism is divergent : What does it mean that catabolism is convergent, and anabolism is divergent? Use specific examples. Why does step six of the citric acid cycle yield FADH2 instead of NADH, given that FADH2 does not result in the production of as many ATP?
Explain what is the specific heat of the metal : After the system had reached a steady temperature it was determined that 7.7 grams of ice had melted. What is the specific heat of the metal. The heat of fusion of ice is equal to 333 J/g.
Should reynolds lease or buy the equipment : In either case, the equipment is worth nothing after 2 years and will be discarded. Should Reynolds lease or buy the equipment?

Reviews

Write a Review

Financial Accounting Questions & Answers

  Financial statement analysis and preparation

Financial Statement Analysis and Preparation

  Shareholder of a company

Describe the ways that a person can become a shareholder of a company. Why Wal-Mart would split its stock?

  Financial and accounting principles

An understanding of financial and accounting principles can be a valuable tool for managers. While not all managers will find themselves calculating financial ratios or preparing annual financial data.

  Prepare a statement of cash flow using the direct method

Prepare a Statement of Cash Flow using the Direct Method and Prepare the Operations section of the Statement of Cash Flow using the Indirect Method.

  Financial accounting assignment

This assignment has one case study and two question apart from case study. Questions related to document Liquidation question and Company financial statements question - Torquay Limited

  Prepare general journal entries for goela

Prepare general journal entries for Goela Ltd

  Principles of financial accounting

Prepare the journal entry to record the acquisition of the assets.

  Prepare general journal entries to record the transactions

Prepare general journal entries to record the transactions, assuming use of the periodic inventory system

  Global reporting initiative

Compare the view espoused by the economist Milton Friedman about the social responsibilities of business with the views express by Stigler.

  Explain the iasb conceptual frameworks

Explain the IASB Conceptual Framework's perspective of users and their decisions.

  Determine the company''s financial statements

T he focus of the report is to determine the extent to which you are comfortable relying on the financial statements as presented by management .

  Computation of free cash flow

Computation of Free Cash Flow

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd