easy · Corporate Credit Analysis credit-metrics
Orion Energy has adjusted debt of $600M and book equity of $400M. Calculate the Debt/Capital ratio and identify a major limitation of using book equity in this calculation.
- 60%; book equity may be distorted by historical goodwill
- 150%; it reflects the firm's total enterprise value base
- 60%; the market value of equity is irrelevant for credit
- 40%; debt is only a minor part of the total capital stack
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