To determine: The amount of new bond issue upsurge company AT &T’s debt to total asset ratio.
Explanation of Solution
The debt to whole assets ratio is usually used as a pointer of a company’s use of financial leverage or borrowed funds. In 2011, company AT&T had $65 billion in rented funds related to $270 billion in assets, which produces a debt-to-total-assets ratio of around 24 percent.
The $3 billion in additional borrowing in 2012 then would increase entire borrowing (assuming no debt is reimbursed in 2012) to $68 billion. Note also that when company AT&T did not pay down any of its debt in 2011, then its entire assets would increase to $273 billion, and the company’s debt to entire assets ratio would upsurge to 24.9 percent for an upsurge of somewhat less than 1 percent.
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