Essay
Little Company wants to buy a new warehouse. Right now, its balance sheet looks like this:
-Refer to the balance sheet above.
a.What is Little Company's debt-to-equity ratio now?
b.If Little Company buys a $10,000 warehouse by paying $1,000 down and signing a ten-year mortgage note for the remainder,what will Little Company's debt-to-equity ratio be?
c.If Little Company buys a $10,000 warehouse by paying cash for the full amount,what will Little Company's debt-to-equity ratio be?
d.Is it ethical to structure business transactions so that the company's ratios look as good as possible?
Correct Answer:
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a.1.08 = ($4,000 + 10,000)/ ($...View Answer
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