Debt-to-Equity Ratio
Consider the following information:
|
Short-term debt
|
$ 10,000
|
|
Interest expense
|
7,500
|
|
Total current liabilities
|
25,000
|
|
Long-term debt
|
70,000
|
|
Cash
|
2,700
|
|
Total liabilities
|
120,000
|
|
Total stockholders' equity
|
90,000
|
|
Income before income taxes
|
12,000
|
Compute the debt-to-equity ratio assuming that (1) debt is defined to include all liabilities, (2) debt is defined to include just interest-bearing debt, and (3) debt is defined to include just long-term, interest-bearing debt.