Question
In: Finance
(Related to Checkpoint 15.1) (Calculating debt ratio) Webb Solutions, Inc. has the following financial structure:...
(Related to Checkpoint 15.1) (Calculating debt ratio) Webb Solutions, Inc. has the following financial structure:
Accounts payable
$490,000
Short-term debt
240,000
Current liabilities
$730,000
Long-term debt
731,000
Shareholders' equity
493,000
Total
$1,954,000
a. Compute Webb's debt ratio and interest-bearing debt ratio.
b. If the market value of Webb's equity is
$2 comma 039 comma 0002,039,000
and the value of the firm's debt is equal to its book value, assuming excess cash is zero, what is thedebt-to-enterprise-value ratio for Webb?
c. If you were a bank loan officer who was analyzing whether or not to loan more money to Webb, which of the ratios calculated in parts a and b is most relevant to your analysis?
a. Webb's debt ratio is
(Round to one decimal place.)
Webb's interest-bearing debt ratio is
(Round to one decimal place.)
b. Webb's debt-to-enterprise-value ratio is
(Round to one decimal place.)
c. If you were a bank loan officer who was analyzing whether or not to loan more money to Webb, which of the ratios calculated in parts a and b is most relevant to your analysis? (Select the best choice below.)
A.
None of these three ratios can measure Webb's ability to repay the loan.
B.
The most relevant of the three debt-related ratios we have calculated is the second, the interest-bearing debt ratio.
C.
The most relevant of the three debt-related ratios we have calculated is the third, the debt-to-enterprise-value ratio.
D.
The most relevant of the three debt-related ratios we have calculated is the first, the debt ratio.
Solutions
jeff jeffy answered 1 year agoRelated Solutions
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