$ 1.00

$ 1.125

$ 0.91

If we assume that the price earnings ratio remains at 15, the price per share will change in proportion to the earnings per share. Realistically, however, we should expect to see a drop in the price earnings ratio, as the increase in debt makes the equity in the firm riskier. Whether the drop will be sufficient to offset or outweigh an increase in earnings per share will depend upon whether the firm has excess debt capacity and whether, by going to 20%, it is moving closer to its optimal debt ratio.

Bank Loan Busters

Bank Loan Busters

There are many physical and mental implications when one is in debt, especially if the said debt is of a considerable amount. Many people don’t realize the extent these implications can have both in the long term and short term. Therefore careful consideration should be given to the following to understand just how debt impacts one’s life.

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