Question

Ratios and Fixed Assets [L{)2] The Maurer company has a long-term debt ratio of .35 and a current ratio of 1.30. Current liabilities are $955, sales 'are $7,210, profit margin is 8.3 percent, and RoE is 17.5 percent. what is the amount of the firm's net fixed assets?

Answer 1

Current ratio = Current assets/ Current liabilities

1.30 = Current assets / 955 (Given)

Current assets = 955 x 1.3

= $1242

Net Profit = 7210 x 8.3%

= $599

Then, Equity = 599 / 17.5%

= $3422

Long Term debt is 35% therefore equity is 65%

Long term debt = 3422 / 0.65 x 0.35

= $1842

Now we can find out fixed assets

Equity = $ 3422

Long term debt = $1842

Currel liabilities = $ 955

Total = $ 6219

-  Current assets = ($ 1242)

Answer = Fixed Assets = $ 4977