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Calculate the company debt ratio

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Reference no: EM132498934

Bengle Industries wants is evaluating whether to lease or purchase needed equipment at a cost of $500,000. If the equipment is leased, the lease would not have to be capitalized. The company's balance sheet prior to the acquisition of the equipment is shown below.

Equipment cost 500000.

Current assets 300000.

Net fixed assets 600000.

Total assets 900000.

Debt 400000.

Equity 500000.

Total claims 900000

Question a. Calculate the company's current debt ratio? a. Current debt ratio.

Question b. Calculate the company's debt ratio if it purchases the equipment with debt.

Question c. Calculate the company's debt ratio if it leases the equipment?

Question d. Will the company's ROA and ROE ratios be affected by its decision to lease or purchase? Why or why not?

Question e. What factors should the company consider in coming to its decision other than net advantage to leasing? Why?

Reference no: EM132498934

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