XYZ, Inc. has a TOTAL DEBT/ASSETS RATIO of .55. What is the firm\'s DEBT/EQUITY
ID: 2692380 • Letter: X
Question
XYZ, Inc. has a TOTAL DEBT/ASSETS RATIO of .55. What is the firm's DEBT/EQUITY RATIO?Answer
GHI, Inc. has NET WORKING CAPITAL of $ 4,050, CURRENT LIABILITIES of $8,580 and INVENTORY of $ 3640. What is the firm's CURRENT RATIO?Answer
A firm's 2012 Balance Sheet Contributed Equity (Common Stock + Paid in Surplus) account balances were $ 712,500 HIGHER that the 2011 end of year balances in the same accounts. The company paid $ 515,000 in Cash Dividends in 2012. What was the firm's Cash Flow to Shareholders for 2012?Answer
a. 0.55 b. 0.45 c. 0.82 d. 1.22Explanation / Answer
1.
Total Debt / Assets = 0.55
or, Total Debt = 0.55*Assets
Hence, Equity = Liabilities - Total Debt
But, Assets = Liabilities,
Equity = Assets - 0.55*Assets = 0.45*Assets
Debt-Equity Ratio = Total Debt / Equity
= 0.55*Asset/0.45*Assets = 1.22
2.
Current Assets - Current Liabilities = Net Working Capital
or, Current Assets - 8580 = 4050
or, Current Assets = 8580 + 4050 = 12630
Current Ratio = Current Assets / Current Liabilites
= 12630/8580 = 1.47
3.
Cash to Shareholders = Dividends - Increase in Equity
= 515000 - 712500 = -197500
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