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The Smathers Company has a long-term debt ratio (i.e., the ratio of long-term debt to long-term...

The Smathers Company has a long-term debt ratio (i.e., the ratio of long-term debt to long-term debt plus equity) of .55 and a current ratio of 1.44. Current liabilities are $2,480, sales are $10,720, profit margin is 12 percent, and ROE is 17 percent.

What is the amount of the firm’s net fixed assets? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

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Answer #1

Current Ratio = Current asset/Current Liabilities = 1.44

Current Asset = 1.44*2480

Current asset = 3571.20

Profit Margin = Net income/Sales = .12

Net income = .12*10720

Net income = 1286.40

ROE = Net income/Equity = .17

Equity = 1286.40/.17

= 7567.05882353

long-term debt ratio = Debt/(Debt+Equity) = .55

Debt/(Debt+7567.05882353) = .55

Debt = .55Debt + 4161.88235294

.45 Debt = 4161.88235294

Debt = 4161.88235294/.45

= 9248.62745098

Total asset = Equity+Debt+Current Liabilities

= 7567.05882353+9248.62745098+2480

= 19295.6862745

Net Fixed asset = Total asset-Current asset

= 19295.6862745-3571.20

= 15724.49

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