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If you have a current ratio of 1.8, current liabilities of 6 million dollars and fixed...

If you have a current ratio of 1.8, current liabilities of 6 million dollars and fixed assets of twelve million dollars with equity of 8 million dollars, what is your long-term debt and debt to equity ratio?

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Answer #1

Assets =Liabilities Equity

Liabilities =Current Liabilities long term debt

Since Current ratio =1.8

Current liabilities given as 6,000,000

So current assets =10,800,000

Fixed assets given as 12,000,000

Equity given as 8,000,000

Total Assets= Current Assets +Fixed assets =$10,800,000+$12,000,000=$22,800,000

So Assets -Equity will give the liability that's $22,800,000-$8,000,000=$14,800,000

Since Total liability =Current liability+long term debt, Long term debt =total liability-current liability that's $14,800,00-6,000,000=$8,800,000

Debt to equity=total Liability/total equity that's $14,800,000/$8,000,000=1.85

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