1.We have spent time focusing on how a company structures its capital and, therefore, the degree of financial leverage the firm takes on. This is a critical consideration at the current time given the financial ravages of the pandemic.

The Buckle, Inc. is a medium-sized firm in the retail space that recently reported 2Q 2021 results (QE 8/1/2020). There are excerpts from the 10Q Report below and the unaudited financial statements from the report are appended at the end.

Several pertinent questions are raised from a study of this information.

a.How would you define the current level of debt for this firm qualitatively and quantitively? This will necessitate defining what you mean by "debt".

b.Damodaran's data suggests that the book value of debt compared to capital for this industry segment is 42%. How is The Buckle positioned relative to this industry benchmark? Is that good, bad, or indifferent at this point in time?

c.What would be the implications for the company if it were to decide to increase financial leverage by increasing the debt ratio but not changing the total capital (i.e., exchange debt for some portion of current equity)? In responding to this consider the impact upon company operations, creditors, and shareholders. Current share price is $28.10 per share and interest on any new debt is anticipated to be 6%.

d.Given the company's financial condition as outlined in the 10Q and your assessment of cash flows, how likely is it that the firm will need additional funds? Would you have concerns about meeting any debt service requirements.

In responding to these questions, you should concentrate on the concepts and logic but use data or analysis if it strengthens your argument. I am looking for a demonstration of the implications of capital structure decisions in the context of this company and at this time.