The Maurer Company has a long-term debt ratio of .36 and a current ratio of 1.70

Question

The Maurer Company has a long-term debt ratio of .36 and a current ratio of 1.70. Current liabilities are $920, sales are $6,340, profit margin is 9.5 percent, and ROE is 19.7 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.)

The Maurer Company has a long-term debt ratio of .36 and a current ratio of 1.70. Current liabilities are $920, sales are $6,340, profit margin is 9.5 percent, and ROE is 19.7 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.)

Explanation / Answer

current ratio =Current assets/Current liabilities

Current assets=(1.7*920)=$1564

Profit margin=net income/sales

net income=(0.095*6340)=$602.3

ROE=net income/equity

equity=(602.3/0.197)=$3057.360406

Long term debt ratio=Long term debt/(Long term debt+Total equity)

0.36*(Long term debt+3057.360406)=Long term debt

0.36Long term debt+1100.649746=Long term debt

Long term debt=1100.649746/(1-0.36)

=$1719.765228

Total assets=Total equity+Total liabilities

(Current assets+Net fixed assets)=(Current liabilities+Long term liabilities)+Total equity

(1564+Net fixed assets)=(920+$1719.765228)+$3057.360406

Net fixed assets=(920+$1719.765228)+$3057.360406-1564

which is equal to

=$4133.13(Approx).

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