OPoole Corporation develops and markets a harness in which a baby may be placed to bounce up and down. OPoole is considering approaching the bond market to raise funds to support the expansion of its manufacturing facility in order to meet the growing demand for the baby harness. The following is an extract from OPoole’s statement of financial position:

Required

a. OPoole’s management would like you to determine the company’s debt to equity ratio and net debt as a percentage of capitalization ratio for 2019 and 2020 as it is considering approaching the bond market.

b. How much debt is OPoole capable of issuing while remaining compliant with a debt to equity ratio of 0.75:1?

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OPOOLE CORPORATION Statement of Financial Position (in thousands) December 31, 2020 December 31, 2019 Current assets $ 65,000 $ 85,000 Cash Trade receivables 865,000 770,000 Inventories 500,000 300,000 Total current assets $1,430,000 $1,155,000 Non-current assets Property, plant, and equipment $1,190,000 $1,375,000 Intangible assets 1,075,000 1,275,000 Total non-current assets $2,265,000 $2,650,000 Total assets $3,695,000 $3,805,000 Current liabilities Trade and other payables $ 25,000 $ 35,000 Current portion of warranty liability 150,000 175,000 Current portion of long-term debt 85,000 95,000 Total current liabilities $ 260,000 $ 305,000 Non-current liabilities Long-term loan $ 900,000 $ 985,000 Deferred income tax liabilities 60,000 65,000 Warranty liability 600,000 700,000 Total non-current liabilities $1,560,000 $1,750,000 Shareholders' Equity Share capital $1,275,000 $1,275,000 Retained earnings 600,000 475,000 Total shareholders' equity $1,875,000 $1,750,000 Total liabilities and shareholders' equity $3,695,000 $3,805,000