Debt ratios measure the proportion of total assets financed by a firms creditors. Shoe Barn Inc. has a debt-to-equity ratio of 2.80, compared to the industry average of 3.36. Its competitor Heally Corp., however, has a debt-to- equity ratio of 2.24. Based on what debt-to-equity ratios imply, which of the following statements is true? Shoe Barn Inc. has higher creditworthiness as compared to Heally Corp. Heally Corp. has a greater risk of bankruptcy than Shoe Barn Inc. O Shoe Barn Inc. has greater financial risk as compared to Heally Corp. but lower than the average financial risk in the industry. Heally Corp.s creditors face higher risk than the average financial risk in the industry. Suppose the stock price of Heally Corp. increases by 15%. What impact will it have on its market-to-debt ratio if nothing changes in the companys balance sheet? The market debt ratio will decrease, reflecting a decrease in the financial risk of the company. The market debt ratio will increase, reflecting a decrease in the financial risk of the company. The market debt ratio will decrease, reflecting an increase in the financial risk of the company. The market debt ratio will increase, reflecting an increase in the financial risk of the company. Data Collected (Millions of dollars) Year 1 EBITDA $550 Interest payments $55 Principal payments $44 Lease payments $25 7.19 5.81 4.64 Heally Corp. reported the following figures in its annual report. 4.44 Based on the information, Heally Corp. has the ability to cover its fixed financial charges times.
Debt ratios measure the proportion of total assets financed by a firm
Debt ratios measure the proportion of total assets financed by a firms creditors. Shoe Barn Inc. has a debt-to-equity ratio of 2.80, compared to the industry average of 3.36. Its competitor Heally Corp., however, has a debt-to- equity ratio of 2.24. Based on what debt-to-equity ratios imply, which of the following statements is true? Shoe Barn Inc. has higher creditworthiness as compared to Heally Corp. Heally Corp. has a greater risk of bankruptcy than Shoe Barn Inc. O Shoe Barn Inc. has greater financial risk as compared to Heally Corp. but lower than the average financial risk in the industry. Heally Corp.s creditors face higher risk than the average financial risk in the industry. Suppose the stock price of Heally Corp. increases by 15%. What impact will it have on its market-to-debt ratio if nothing changes in the companys balance sheet? The market debt ratio will decrease, reflecting a decrease in the financial risk of the company. The market debt ratio will increase, reflecting a decrease in the financial risk of the company. The market debt ratio will decrease, reflecting an increase in the financial risk of the company. The market debt ratio will increase, reflecting an increase in the financial risk of the company. Data Collected (Millions of dollars) Year 1 EBITDA $550 Interest payments $55 Principal payments $44 Lease payments $25 7.19 5.81 4.64 Heally Corp. reported the following figures in its annual report. 4.44 Based on the information, Heally Corp. has the ability to cover its fixed financial charges times.
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