What would happen to the debt-to-assets ratio, if at the end of 2012, the company borrowed $1,000 from the bank by signing a promissory note and received $2,000 from the issuance of stock?
A) This transaction would cause the debt-to-assets ratio to increase.
B) This ratio would increase indicating a less risky financing strategy.
C) The debt-to-assets ratio would not change because this transaction would not be
D) recorded until 2013.
E) This ratio would have increased even if this transaction had not occurred.

Question

Quizplus · Accepted Answer

Borrowing $1,000 increases the total debt, while receiving $2,000 from the issuance of stock increases the total assets, resulting in an increase in the debt-to-assets ratio.

What Would Happen to the Debt-To-Assets Ratio, If at the End