Q1: Luther Corporation Consolidated Balance Sheet December? 31, 2006 and 2005? (
ID: 2827520 • Letter: Q
Question
Q1:
Luther Corporation
Consolidated Balance Sheet
December? 31, 2006 and 2005? (in $? millions)
Assets
2006
2005
Liabilities and
?Stockholders' Equity
2006
2005
Current Assets
Current Liabilities
Cash
64
58.5
Accounts payable
85.4
73.5
Accounts receivable
56.2
39.6
Notes payable? /
shortminus?term
9.3
9.6
Inventories
46.6
42.9
Current maturities of
longminus?term
38.8
36.9
Other current assets
5.8
3.0
Other current liabilities
6.0
12.0
?????????????Total current assets
172.6
144.0
????????Total current liabilities
139.5
132.0
Longminus?Term
Longminus?Term
??Land
65
62.1
Longminus?term
239.1
168.9
??Buildings
106.4
91.5
??Capital lease obligations
??Equipment
116.5
99.6
??Less accumulated
??depreciation
?(56.2?)
?(52.5)
Deferred taxes
22.8
22.2
Net? property, plant, and
equipment
231.7
200.7
longminus?term
?
??
Goodwill
60.0
min??
longminus?term
261.9261.9
191.1
longminus?term
63.0
42.0
Total liabilities
401.4
323.1
longminus?term
354.7
242.7
?Stockholders' Equity
125.9
63.6
Total Assets
527.3
386.7
Total liabilities and
?Stockholders' Equity
527.3
386.7
Refer to the balance sheet above. If in 2006 Luther has 10.2 million shares outstanding and these shares are trading at? $16 per? share, then using the market value of? equity, the? debt-equity ratio for Luther in 2006 is closest? to:
A.3.52
B.1.76
C.0.88
D.2.46
Assets
2006
2005
Liabilities and
?Stockholders' Equity
2006
2005
Current Assets
Current Liabilities
Cash
64
58.5
Accounts payable
85.4
73.5
Accounts receivable
56.2
39.6
Notes payable? /
shortminus?term
debt9.3
9.6
Inventories
46.6
42.9
Current maturities of
longminus?term
debt38.8
36.9
Other current assets
5.8
3.0
Other current liabilities
6.0
12.0
?????????????Total current assets
172.6
144.0
????????Total current liabilities
139.5
132.0
Longminus?Term
AssetsLongminus?Term
Liabilities??Land
65
62.1
??Longminus?term
debt239.1
168.9
??Buildings
106.4
91.5
??Capital lease obligations
??Equipment
116.5
99.6
??Less accumulated
??depreciation
?(56.2?)
?(52.5)
Deferred taxes
22.8
22.2
Net? property, plant, and
equipment
231.7
200.7
Otherlongminus?term
liabilities?
??
Goodwill
60.0
min??
????Totallongminus?term
liabilities261.9261.9
191.1
Otherlongminus?term
assets63.0
42.0
Total liabilities
401.4
323.1
????Totallongminus?term
assets354.7
242.7
?Stockholders' Equity
125.9
63.6
Total Assets
527.3
386.7
Total liabilities and
?Stockholders' Equity
527.3
386.7
Explanation / Answer
Debt typically includes long-term debts, short-term interest-bearing liabilities and the current portion of long-term debt.
Total Debt = Notes Payable + Current Maturities of Long-Term Debt + Long Term Debt = 9.3 + 38.8 + 239.1 = $ 287.2 million
Market Value of Equity = Price per Share x Shares Outstanding = 16 x 10.2 = $ 163.2 million
Debt to Equity Ratio = 287.2 / 163.2 = 1.759 or 1.76 approximately.
Hence, the correct option is (B).
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