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 .43 and a current ratio of 1.27. Current liabilities are $2,395, sales are $10,465, profit margin is 11 percent, and ROE is 16 percent.

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

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

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

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

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

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

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

Answer 1

(a)

Current ratio = Current Assets/Current liabilities =1.27

Current liabilities= 2395

Current Assets/2395= 1.27

Current Assets = 2395*1.27= 3041.65

So, current Assets is $3041.65

(b)

Sales = 10465

Profit margin = 11%

Net income= Sales*Profit margin

10465*11%

1151.15

Net income is $1151.15

(c)

ROE = 16%

ROE = Net income/equity = 16%

1151.15/equity = 16%

Equity = 1151.15/16%

Equity = 7194.6875

So, Equity is $7194.69

(d)

Debt ratio = Long term debt/(long term debt+equity)= 0.43

long term debt/(long term debt+7194.69)= 0.43

long term debt = 0.43 long term debt + 3,093.72

0.57 long term debt = 3,093.72

So, long term debt = 5427.571272

So, long term debt is $5427.57