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A company can improve (lower) its debt-to-total assets ratio by doing which of the following?

Borrow more. Shift short-term to long-term debt. Shift long-term to short-term debt. Sell common stock.

Accounting Accounts Payable Accounts Receivable Accounting Analysis
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Question ajoutée par خالد ابراهيم , Senior Accountant , Al Khayyat Group /Peugeot and Mazda Automative agent in Jordan
Date de publication: 2013/12/03
Apprécier (3) Vues (47) Suiveurs (5) Réponses (7) Report Question
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Rehan Qureshi
par Rehan Qureshi , Financial Consultant , Self Employeed

Selling the common stock is the right answer in the situation

Niranjan Singh
par Niranjan Singh , NA , NA (Private Practice)

Borrowing more will increase Debt as a result increases debt-equity ratio. So, option1 is wrong.

Short and long term debts, both are included in calculation of debt-equity ratio. Hence, shifting in debt nature will not have any effect on ratio. So, option2&3 is wrong.

Selling common stock will increase inflow of cash which can be used to repay the loan and reduce the debt burden as a result reduces the debt-equity ratio. So, option4 is right.

 

Mark Angelo Damuag
par Mark Angelo Damuag , Financial Analyst , Evacare Management Consultancy Inc

To improve this, the company should sell common stock.

suleman anjum
par suleman anjum , Accounts and Finance Executive , Paksolarcells Pvt. ltd

Sell common stock.

Emad Mohammed said abdalla
par Emad Mohammed said abdalla , ERP & IT Software, operation general manager . , AL DOHA Company

>>>>>>>>>>>>. Sell common stock.

 

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