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 finance lease,Luther's debt-to-equity ratio will be closest to:
A)0.66
B)1.5
C)0.80
D)2.0
E)2.5

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 finance lease,Luther's debt-to-equity ratio will be closest to:
A)0.66 
B)1.5 
C)0.80 
D)2.0 
E)2.5

Quizplus · Accepted Answer

A finance lease is treated as a liability on the balance sheet, increasing both assets and liabilities, which affects the debt-to-equity ratio. The ratio will increase as liabilities increase, making it closest to 2.0.

Use the Table for the Question(s)below