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The Lecma Widget Company has a ratio of long-term debt-to-total assets of .40, D/E of .95...

  1. The Lecma Widget Company has a ratio of long-term debt-to-total assets of .40, D/E of .95 and a current ratio of 1.30. Current liabilities are $900, sales are $5,320, net profit margin is 9.4%, and ROE is 18.2%. What is the amount of the firm’s net fixed assets?
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Answer #1

Net Income = Sales*Net profit margin = $5320*9.4%

Net Income = $500.08

- Return on Equity(ROE) = Net income/Total Equity

0.182 = $500.08/Total Equity

Total Equity = $2747.69

- Debt/Equity Ratio = Total Debt/Total Equity

0.95 = Total Debt/$2747.69

Total Debt = $2610.31

Total Assets = Total equity + Total Liabilities

Total Assets = $2747.69 + $2610.31

Total Assets = $5358

- Current ratio = Current Assets/Current Liabilities

1.30 = Current Assets/$900

Current Assets = $1170

Net Fixed Assets = Total Assets - Current Assets

Net Fixed Assets = $5358 - $1170

Net Fixed Assets = $4188

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