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Assume buyer is acquiring target, financed with 25% debt and 75% stock.

a) Leverage ratio
b) Debt-equity ratio
c) Capital structure
d) Liquidity ratio

User Fred Sousa
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1 Answer

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Final answer:

The leverage ratio is 1:3, the debt-equity ratio is 1:3, the capital structure consists of 25% debt and 75% stock, and the liquidity ratio is a measure of a company's ability to meet short-term obligations.

Step-by-step explanation:

a) The leverage ratio is the ratio of debt to equity in a company's capital structure. In this case, the buyer is using 25% debt and 75% stock to finance the acquisition of the target. Therefore, the leverage ratio would be 25:75, or 1:3.

b) The debt-equity ratio is the ratio of debt to equity in a company's capital structure. In this case, the buyer is using 25% debt and 75% stock to finance the acquisition of the target. Therefore, the debt-equity ratio would be 25:75, or 1:3.

c) Capital structure refers to the mix of debt and equity used by a company to finance its operations. In this case, the buyer is using 25% debt and 75% stock to finance the acquisition of the target, which represents the capital structure of the transaction.

d) The liquidity ratio measures a company's ability to meet its short-term obligations. It is not directly related to the financing of the acquisition, but rather the buyer's overall financial position.

User Clawesome
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