Question

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.)

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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