You have been asked to estimate the debt ratio for a firm with the following financing details:
• The firm has two classes of shares outstanding: 50,000 shares of class A stock, with 2 voting rights per share, trading at $100 per share, and 100,000 shares of class B stock, with 1/2 voting right per share, trading at $90 per share.
• The firm has $5 million in bank debt, and the debt was taken on recently.
Estimate the debt ratio. Why does it matter when the bank debt was taken on?