17) Chase Challengingware Store had $500,000 in total assets, $175,000 in total liabilities, and $325,000 in shareholders’ equity. Interest expense for the period was $7,500. Income from operations was $50,000. Calculate the debt-to-equity ratio. Round your answer to the nearest tenth of a percent.
18) Maxine’s Equipment Company had $400,000 in total assets, $275,000 in total liabilities, and $125,000 in shareholders’ equity. Interest expense for the period was $15,050. Income from operations was $80,000. Calculate the debt-to-equity ratio. Round your answer to the nearest percentage.
19) Lockwood Corporation had $1,523,000 in total assets, $758,000 in total liabilities, and $765,000 in stockholders’ equity. Interest expense for the period was $151,350. Income from operations was $380,750. Calculate the debt-to-equity ratio. Round your answer to the nearest tenth of a percent.
20) Merryworth, Inc. had $2,000,000 in total assets, of which $600,000 are current assets, and $1,200,000 in total liabilities, of which $400,000 are current liabilities. Calculate the debt-to-equity ratio. Round your answer to the nearest whole percent.
21) Berry Rich, Inc. had $600,000 in total assets, of which $200,000 are current assets, and $200,000 in shareholders’ equity, of which $80,000 is contributed capital. Calculate the debt-to-equity ratio. Round your answer to the nearest whole percent.
22) Gary’s Gadgets prepared the following preliminary balance sheet a few days before its December 31 yearend:
Gary's Gadgets
Preliminary Balance Sheet
December 27, 2011
Cash$ 6,000Accounts payable$ 2,500
Accounts receivable3,000
Inventory2,000Common stock1,000
______Retained earnings7,500
Total liabilities &
Total assets$11,000shareholders' equity$11,000
a. Use the preliminary balance sheet to calculate the debt-to-equity ratio.
b. Gary thinks that investors will be more interested in his company if it has very few liabilities. He plans to pay $2,000 of the accounts payable before December 31. What will the new debt-to-equity ratio be after the payment has been made?
c. Is it ethical to make last-minute payments to improve the appearance of the balance sheet?
d. Is it true that investors prefer companies with very little debt? Explain positive financial leverage.