Use the table for the question(s)below.
Luther Industries currently has the following balance sheet (in thousands of dollars): Luther is about to add a new fleet of delivery trucks.The price of the fleet is $1.5 million.
-If Luther acquires the new fleet of delivery trucks using a capital lease,Luther's Debt to Equity ratio will be closest to:
A)0.66.
B)1.5.
C)0.80.
D)2.0.

Question

Use the table for the question(s)below.
Luther Industries currently has the following balance sheet (in thousands of dollars):  Luther is about to add a new fleet of delivery trucks.The price of the fleet is $1.5 million.
-If Luther acquires the new fleet of delivery trucks using a capital lease,Luther's Debt to Equity ratio will be closest to:
A)0.66. 
B)1.5. 
C)0.80. 
D)2.0.

Quizplus · Accepted Answer

A capital lease is considered a liability, which increases the company's debt. This would increase the Debt to Equity ratio, making it closer to 2.0.

Use the Table for the Question(s)below