Which company will have the higher debtcapital ratio assume, Ask an Expert

Accounting

Assume that company ABC issues $20 million in long-term debt at par when interest rates were low and company DEF issued $20 million in long-term debt at par when interest rates were high. Assuming that interest rates remain high:

a. Which company will have the higher debt/capital ratio (assume no other debt and identical equity)?

b. ABC's debt matures in 18 months and DEF's debt matures in 9 years. What would be the effect on your analysis?

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Financial Accounting, Accounting

Category:- Financial Accounting
Reference No.:- M9408825

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