uestion 5
Krispy Kreme Donuts has a leverage of 2.5 What does this mean? (Hint- leverage is calculated as Assets/Equity and you purchase assets with either equity or debt)
$2.50 of assets is funded with $1.00 of debt and $1.50 of equity.
$2.50 of assets is funded with $1.00 of equity and $1.50 of debt.
Assets are funded with 250% debt.
Assets are funded with 25% equity.
2.5 donuts equal 1 donut hole
Solution
Leverage = Assets/ Equity
2.5/1 = 2.5
Assets are 2.5, Equity is 1
Hence the correct option is
$2.50 of assets is funded with $1.00 of equity and $1.50 of debt.
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uestion 5 Krispy Kreme Donuts has a leverage of 2-5 What does this mea.docx
1. uestion 5
Krispy Kreme Donuts has a leverage of 2.5 What does this mean? (Hint- leverage is calculated
as Assets/Equity and you purchase assets with either equity or debt)
$2.50 of assets is funded with $1.00 of debt and $1.50 of equity.
$2.50 of assets is funded with $1.00 of equity and $1.50 of debt.
Assets are funded with 250% debt.
Assets are funded with 25% equity.
2.5 donuts equal 1 donut hole
$2.50 of assets is funded with $1.00 of debt and $1.50 of equity.
$2.50 of assets is funded with $1.00 of equity and $1.50 of debt.
Assets are funded with 250% debt.
Assets are funded with 25% equity.
2.5 donuts equal 1 donut hole
Solution
Leverage = Assets/ Equity
2.5/1 = 2.5
Assets are 2.5, Equity is 1
Hence the correct option is
$2.50 of assets is funded with $1.00 of equity and $1.50 of debt.
