Question
2.Based on the pro forma balance sheet for 2019, calculate the following 2019 ratios for Drexel. The firms 2018 ratios and the projected 2019 industry
2.Based on the pro forma balance sheet for 2019, calculate the following 2019 ratios for Drexel. The firms 2018 ratios and the projected 2019 industry averages are shown for comparison:
2018. 2019 Industry average
Current ratio: 2.5 3
Debt/total assets: 33.90%. 30%
ROE: 13% 12%
3. Based on #1 and #2 above, provide a concise (300 words or so) analysis of the impact of borrowing the required AFN as reflected in the projected 2019 ratios as compared to the industry averages. Should Drexel consider raising the AFN through equity or some combination of increased debt and equity? Explain your answers thoroughly.
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Intermediate Accounting
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones
10th Edition
324300980, 978-0324300987
