Question

Capital structure​ analysis)  The liabilities and​ owners' equity for Campbell Industries is found​ here:   LOADING.... a.  What percentage of the​ firm's assets does the firm finance using debt​ (liabilities)? b.  If Campbell were to purchase a new warehouse for $ 1.3 million and finance it entirely with​ long-term debt, what would be the​ firm's new debt​ ratio? a.  What percentage of the​ firm's assets does the firm finance using debt​ (liabilities)? The fraction of the​ firm's assets that the firm finances using debt is nothing​%. ​(Round to one decimal​ place.)

Accounts payable	$ 450000
Notes payable	$ 240000
Current liabilities	$ 690000
​Long-term debt	$ 1250000
Common equity	$ 5499 000
Total liabilities and equity	7,439,000

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Answer 1

Answer a.

Total Assets = Total Liabilities and Equity
Total Assets = $7,439,000

Total Liabilities = Current Liabilities + Long-term Debt
Total Liabilities = $690,000 + $1,250,000
Total Liabilities = $1,940,000

Debt Ratio = Total Liabilities / Total Assets
Debt Ratio = $1,940,000 / $7,439,000
Debt Ratio = 26.1%

Answer b.

If company financed purchased of new warehouse of $1,300,000 with long-term debt.

Total Liabilities = $1,940,000 + $1,300,000
Total Liabilities = $3,240,000

Total Assets = $7,439,000 + $1,300,000
Total Assets = $8,739,000

Debt Ratio = Total Liabilities / Total Assets
Debt Ratio = $3,240,000 / $8,739,000
Debt Ratio = 37.1%