A. Consider this simplified balance sheet for Geomorph Trading: a. Calculate the ratio of debt to…

A.Consider this simplified balance sheet for Geomorph Trading:

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a. Calculate the ratio of debt to equity.

b. What are Geomorph’s net working capital and total long-term capital? Calculate the ratio

of debt to total long-term capital.

B. Discuss alternative measures of financial leverage. Should the market value

of equity be used or the book value? Is it better to use the market value of debt or the book

value? How should you treat off-balance-sheet obligations such as pension liabilities? How

would you treat preferred stock?