Question

i Data Table (In millions) | Total current assets $ ................ 15.5 15.8 Property, plant, equipment, and other.assets ..... | 31.3 || Total current liabilities 9.8 Total long-term liabilities 5.3 Total shareholders' equity | 16.2 31.3 $ Print Done

Answer 1

a. Current Ratio = Current Assets/Current Liabilities

Current Ratio = (15.5+2.5)/9.8 = 1.84 times

Note : Revenue of 2.5 Million $ on account increases our trade receivables and hence current assets are increased by 2.5 Million $.

Debt ratio = Total debt/Total Assets

Debt ratio = (Current Liabilities + Long-term liabilities) / (Current Assets + Property Plant & Equipment)

Debt ratio = (9.8+5.3)/(15.5+2.5+15.8) = 44.67%

b. Current Ratio = Current Assets/Current Liabilities

Current Ratio = (15.5+6)/9.8 = 2.19 times

Note : Since we have borrowed 6 Million$ long-term debt, our cash balance also increases which increases our current assets as well.

Debt ratio = Total debt/Total Assets

Debt ratio = (Current Liabilities + Long-term liabilities) / (Current Assets + Property Plant & Equipment)

Debt ratio = (9.8+5.3+6)/(15.5+6+15.8) = 56.57%

c. Current Ratio = Current Assets/Current Liabilities

Current Ratio = (15.5-4.9)/(9.8-4.9) = 2.16 times

Note : Half of CL paid in cash = 9.8/2 = 4.9 Million $. It means both our current liabilities as well as current assets will go down by 4.9 Million $

Debt ratio = Total debt/Total Assets

Debt ratio = (Current Liabilities + Long-term liabilities) / (Current Assets + Property Plant & Equipment)

Debt ratio = (9.8-4.9+5.3)/(15.5-4.9+15.8) = 38.64%

d. Current Ratio = Current Assets/Current Liabilities

Current Ratio = (15.5-0.5)/9.8 = 1.53 times

Note : Selling expenses paid of 0.5 Million $ reduces cash and hence current assets by that amount.

Debt ratio = Total debt/Total Assets

Debt ratio = (Current Liabilities + Long-term liabilities) / (Current Assets + Property Plant & Equipment)

Debt ratio = (9.8+5.3)/(15.5-0.5+15.8) = 49.03%