Question: Accounts payable $516,000
Short-term debt $227,000
Current liabilities $743,000
Long-term debt $726,000
Shareholders' equity $487,000
Total $1,956,000
a. Compute Webb's debt ratio and interest-bearing debt ratio.
b. If the market value of Webb's equity is 2,078,000 and the value of the firm's debt is equal to its book value, assuming excess cash is zero, what is the debt-to-enterprise-value ratio for Webb?
c. If you were a bank loan officer who was analyzing whether or not to loan more money to Webb, which of the ratios calculated in parts a and b is most relevant to your analysis?