Question
Santana Rey has consulted with her local banker and is considering financing an expansion of her business by obtaining a long-term bank loan. Selected account
Santana Rey has consulted with her local banker and is considering financing an expansion of her business by obtaining a long-term bank loan. Selected account balances at March 31, 2022, for Business Solutions follow.
Total assets | $120,668 | Total liabilities | $871 | Total equity | $119,797 |
Required:
The bank has offered a long-term secured note to Business Solutions. The banks loan procedures require that a clients debt-to-equity ratio not exceed 0.84. As of March 31, 2022, what is the maximum amount that Business Solutions could borrow from this bank?
Note: Round your intermediate calculations to the nearest dollar amount.
Assume Business Solutions borrows the maximum amount allowed from the bank.
Note: Round your intermediate dollar values to the nearest whole number and final answers to 1 decimal place.
(a) What percentage of assets would be financed by debt?
(b) What percentage of assets would be financed by equity?
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