Question

# 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 .53 and a current ratio of 1.42. Current liabilities are \$2,470, sales are \$10,690, profit margin is 10 percent, and ROE is 15 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.)

Net fixed assets            \$

 Current ratio = Current assets / Current liabilities 1.42 = Current assets / 2470 Current assets = 1.42 * 2470 3507.4 Net income = Sales * Profit margin = 10690 * 10% 1069 ROE = Net income / Total Equity 15% = 1069 / Equity Equity = 1069 / 15% 7126.67 Long term debt ratio = Long term debt / ( Long term debt + Equity ) 0.53 = Long term debt / ( Long term debt + 7126.67 ) Long term debt = 0.53 * ( Long term debt + 7126.67 ) Long term debt = 0.53Long term debt + 3777.14 Long term debt - 0.53Long term debt = 3777.14 0.47Long term debt = 3777.14 Long term debt = 3777.14 / 0.47 8036.47 Long term debt + Equity + Current liabilities = Current assets + Net fixed assets 8036.47 + 7126.67 + 2470 = 3507.4 + Net fixed assets Net fixed assets = 8036.47 + 7126.67 + 2470 - 3507.4 14125.74

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