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in fy 2009, the mlk settlement house has total assets of $900,000 and current assets of...

in fy 2009, the mlk settlement house has total assets of $900,000 and current assets of $350,000. its current liabilities are $240,000, and its long-term liabilities are $1,000,000. what are the ratios and what conclusions can you draw now that you have two years’ worth of data?

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Answer #1

1.
Current ratio = Current assets/current liabilities = $350,000/$240,000 = 1.4583 or 1.46

Current ratio measures a company's ability to pay back its short term liabilities. Current ratio is 1.46 , so we can conclude that the current assets are sufficient to cover the current liabilities of the company.

2.
Long term debt to total debt ratio = Long term debt / Total debt = $1,000,000/$1,240,000 = 0.8065

Long term debt to total debt ratio is 0.8065. A high long term debt to equity ratio indicates that the company does not have adequate money to run the operations of the company.

3.
Short term debt to total debt ratio = Short term debt/ total debt = $240,000 / $1,240,000 = 0.1935

A high short term debt to total debt ratio indicates that the debt repayments are approaching and the company needs to renegotiate of raise additional long term loans.

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