Reynolds Construction needs a piece of equipment that costs $200. Reynolds can either lease the equipment or borrow $200 from a local bank and buy the equipment. If the equipment is leased, the lease would not have to be capitalized. Reynolds s balance sheet prior to the acquisition of the equipment is as follows:

Current assets	300	Debt	400
Fixed assets	500	Equity	400
Total assets	800	Total claims	800

What is Reynoldss current debt ratio?

What would the companys debt ratio be if it purchased the equipment?

What would the companys debt ratio be if the equipment were leased?

Would the companys financial risk be different under the leasing and purchasing alternatives?