The following is an excerpt from the Freight Train, Inc.'s 2016 annual report:
A. Calculate the debt-to-equity ratio for Freight Train, Inc. for 2016 and 2015.
B. Does Freight Train, Inc. include the net present value of operating leases in the debt reported on the balance sheet? Why or why not?
C. Recalculate the debt-to-equity ratio for Freight Train, Inc. for 2016 and 2015 under the assumption that leases were capitalized. Would capitalizing these leases significantly affect the company's debt to equity ratio? Is there a concern about the company's solvency?

Question

The following is an excerpt from the Freight Train, Inc.'s 2016 annual report:
  A. Calculate the debt-to-equity ratio for Freight Train, Inc. for 2016 and 2015.
B. Does Freight Train, Inc. include the net present value of operating leases in the debt reported on the balance sheet? Why or why not?
C. Recalculate the debt-to-equity ratio for Freight Train, Inc. for 2016 and 2015 under the assumption that leases were capitalized. Would capitalizing these leases significantly affect the company's debt to equity ratio? Is there a concern about the company's solvency?

Quizplus · Accepted Answer

The Answer of The following is an excerpt from the Freight Train, Inc.'s 2016 annual report:
  A. Calculate the debt-to-equity ratio for Freight Train, Inc. for 2016 and 2015.
B. Does Freight Train, Inc. include the net present value of operating leases in the debt reported on the balance sheet? Why or why not?
C. Recalculate the debt-to-equity ratio for Freight Train, Inc. for 2016 and 2015 under the assumption that leases were capitalized. Would capitalizing these leases significantly affect the company's debt to equity ratio? Is there a concern about the company's solvency?

The Following Is an Excerpt from the Freight Train, Inc