Chapter 10, Problem 16E

1)

To determine

Introduction: The debt-to-equity (D/E) ratio measures a company's reliance on debt by comparing its total liabilities to its shareholder equity. A larger D/E ratio denotes greater risk, whereas a particularly low one can signify that a company is not utilizing debt funding for expansion.

(a) Debt to equity ratio

(b) Debt to equity ratio after borrowing $500,000

2)

To determine

Introduction: The debt-to-equity (D/E) ratio measures a company's reliance on debt by comparing its total liabilities to its shareholder equity. A larger D/E ratio denotes greater risk, whereas a particularly low one can signify that a company is not utilizing debt funding for expansion.

Financial structure becomes less risky or riskier after borrowing.