Bryan invested in Bryco stock when the firm was financed solely with equity. The firm now has a debt-equity ratio of .3. To maintain the same level of leverage he originally had, Bryan needs to:--- sell some shares of Bryco stock and loan out the proceeds
Debt-to-equity ratio:
The debt-to-equity ratio is a financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets. Closely related to leveraging, the ratio is also known as risk, gearing or leverage
How is debt equity ratio calculated?
The formula for calculating the debt-to-equity ratio is to take a company's total liabilities and divide them by its total shareholders' equity. A good debt-to-equity ratio is generally below 2.0 for most companies and industries
The question is incomplete. Missing option are given below:
(a) borrow some money and purchase additional shares of Bryco stock.
(b) maintain his current position in Bryco stock.
(c) sell some shares of Bryco stock and hold the proceeds in cash.
(d) sell some shares of Bryco stock and loan out the proceeds
(e) sell half of his Bryco stock and invest the proceeds in risk-free securities.
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