Reynolds Construction needs a piece of equipment that costs $200. Reynolds either can lease the equipment or
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Reynolds Construction needs a piece of equipment that costs $200. Reynolds either can lease the equipment or borrow $200 from a local bank and buy the equipment. If the equipment is leased, the lease would not have to be capitalized. Reynolds balance sheet prior to the acquisition of the equipment is as follows:
a. (1) What is Reynolds current debt ratio?
(2) What would be the company's debt ratio if it purchased the equipment?
(3) What would be the debt ratio if the equipment were leased?
b. Would the company's financial risk be different under the leasing and purchasing alternatives?
Balance SheetBalance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
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Financial management theory and practice
ISBN: 978-0324422696
12th Edition
Authors: Eugene F. Brigham and Michael C. Ehrhardt
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