Reference no: EM132871852
Question - Boom Company currently has $500,000 of assets and $160,000 of debt. Total revenues last year were $100,000, and total expenses were $88,000.
Required - Assuming the net income remains unchanged, calculate the company's return on assets ratio, debt ratio, and debt/equity ratio under the following independent assumptions or changes:
1. No changes in above.
2. Assuming the company had leased $30,000 of its assets "off the balance sheet."
3. Assuming the company had leased $60,000 of its assets "off the balance sheet."
4. Assuming the company had leased $90,000 of its assets "off the balance sheet."
5. Assuming the company had leased $120,000 of its assets "off the balance sheet."
Based on a review of your calculations for the financial ratios above, explain why a firm might want to engage in "off balance sheet" financing.
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