Homework Answers
a) Total sales = pretax profit/pretax profit percentage *100 => 360,000/15*100 = 2,400,000
So, accounts receivale = 2400000*65 days/365 days = $ 427,397
b) Pretax return on assets = 10% ie 3,600,000 *10% = 360,000
Equity = 3600000*(100-65)/100 = 1260000
So pretax return on equity = 360000/1260000*100 = 28.57%
c) Total assets = 3,600,000 of which half is current assets (given). So, current assets (CA) = 3600000/2 = 1,800,000.
Working capital = Current asset - current liabilities (CL)
ie, 800000 = 1800000-CL
so, CL = 1,000,000.
Hence Current Ratio = CA/CL = 1.8
d) Total Debt = 3600,000 * 65% = 2340000, of which current liability is 1000000. So Long term debt = 1,340,000
Please comment in case of any query regarding this solution.
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