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?

Question

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?

Quizplus · Accepted Answer

The Answer of 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?

Little Company Wants to Buy a New Warehouse