Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Financial Management I need the answer for (( ALL THE QUESTIONS)) please! please do not answer if you are not sure. Companies have the opportunity
Financial Management
I need the answer for (( ALL THE QUESTIONS)) please!
please do not answer if you are not sure.
Companies have the opportunity to use varying amounts of different sources of financing to acquire their assets, including internal and external sources, and debt (borrowed) and equity funds. Company A uses long-term debt to finance its assets, and company B uses capital generated from shareholders to finance its assets. Which company would be considered a financially leveraged firm? Company A Company B Which of the following is true about the leveraging effect? Interest on debt is a tax deductible expense, which means that it can reduce a firm's taxable income and tax obligation. Interest on debt can be deducted from pre-tax income, resulting in a greater taxable income and a smaller available operating income. Blue Sky Drone Company has a total asset turnover ratio of 6.00x, net annual sales of $25 million, and operating expenses of $11.25 million (including depreclation and amortization). On its current balance sheet and income statement, respectively, it reported total debt of $2.5 million, on which it pays 11% interest on its cutstanding debt. To analyze a company's financial leverage situation, you need to measure the firm's debt management ratios. Based on the preceding information, what are the values for Blue Sky Drone's debt management ratios? (Note: Do not round intermediate calculations.) Blue Sky Drone Company raises around from creditors for each dollar of equity. Influenoed by a firm's ability to make interest payments and pay back its debt, if all else is equal, creditors would prefer to give loans to companies with times-interest-earned ratios (TIE)Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started