Define leverage ratio as ending debt divided by ending total assets, and debt as the sum of non- operating liabilities. The leverage ratio as reported by Rent-A-Center in 2021 was 0.326 calculated as follows (numbers are inclusive of operating lease assets and liabilities): Total Assets Total Debt Leverage Ratio 2,993,327 1,867,734 0.624 Using the present value of operating leases disclosed by the firm of $296,535, calculate what the debt ratio would have been had the new accounting rules not been adopted. Assume the reported operating lease liability equals the reported right-of-use asset amount. Hint, the number will be less than 0.624 and somewhere between 0.5 and 0.6.

Define leverage ratio as ending debt divided by ending total assets, and debt as the sum of non- operating liabilities. The leverage ratio as reported by Rent-A-Center in 2021 was 0.326 calculated as follows (numbers are inclusive of operating lease assets and liabilities): Total Assets Total Debt Leverage Ratio 2,993,327 1,867,734 0.624 Using the present value of operating leases disclosed by the firm of $296,535, calculate what the debt ratio would have been had the new accounting rules not been adopted. Assume the reported operating lease liability equals the reported right-of-use asset amount. Hint, the number will be less than 0.624 and somewhere between 0.5 and 0.6.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Question

Define leverage ratio as ending debt divided by ending total assets, and debt as the sum of non-
operating liabilities. The leverage ratio as reported by Rent-A-Center in 2021 was 0.326
calculated as follows (numbers are inclusive of operating lease assets and liabilities):
Total Assets
Total Debt
Leverage Ratio
2,993,327
1,867,734
0.624
Using the present value of operating leases disclosed by the firm of $296,535, calculate what the
debt ratio would have been had the new accounting rules not been adopted. Assume the
reported operating lease liability equals the reported right-of-use asset amount. Hint, the number
will be less than 0.624 and somewhere between 0.5 and 0.6.

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