1) How do changes in the ratio of current liabilities to total assets affect profitability and risk?
2) In most economic conditions, current liabilities are a cheaper form of financing than long-term funds...Think about what this means for the financing costs and the firm’s profits.
1)
The changes in the ratio of current liabilities to total assets directly affects profitability or risk as this ratio shows the ability of the company to pay its current liabilities
Whenever this ratio is less than 1, it shows that the company is
having more Assets than liabilities and there is no risk and more
profitability.
2)
It can be truly said that in most economic conditions, current liabilities are a cheaper form of financing than long term funds as :
1) How do changes in the ratio of current liabilities to total assets affect profitability and...
1. Explain how different amounts of current assets and current liabilities affect firms’ profitability. 2. Discuss how the cash conversion cycle is determined, how the cash budget is constructed, and how each is used in working capital management. 3. Explain how companies decide on the proper amount of each current asset—cash, marketable securities, accounts receivable, and inventory.
assets Total current liabilities Debt Ratio C. Debt ratio -the proportion of a company's assets financed with debt. Debt ratio = Total Liabilities Total Assets D How transactions affect the ratios Given the following balances: Current Assets $150,000 Current Liabilities 75,000 Total Assets Total Liabilities 300,000 120,000 1. What is net working capital? 2. What are the current and debt ratios? 3. How would the following transactions affect the current ratio & the debt ratio (Improve, Deteriorate, No Change)? a....
The balance sheet for Munoz Corporation follows: Current assets Long-term assets (net) Total assets Current liabilities Long-term liabilities Total liabilities Common stock and retained earnings Total liabilities and stockholders' equity $ 235,000 762,000 $997,000 $160,000 457,000 617,000 380,000 $997,000 Required Compute the following. (Round "Ratios" to 1 decimal place.) ace Working capital Current ratio Debt to assets ratio Debt to equity ratio
3. Income Statement Sales Costs Balance Sheet Current 3,900 liabilities assets Current 2,100 assets 8,600 Long-term 3,700 5,500Fixed debt Taxable income $2,400 Equity 6,700 Taxes (25%) 600 Total $12,500 Total $12,500 Net income $ 1,800 Assets, costs, and current liabilities are proportional to sales. Long-term debt and equity are not. The company maintains a constant 40 percent dividend payout ratio. As with every other firm in its industry, next year's sales are projected to increase by exactly 15 percent. What...
1) How is the current ratio calculated? a. current assets minus current liabilities b. total assets divided by total liabilities c. total assets minus total liabilities d. current assets divided by current liabilities 2) The common size income statement reports each income statement item as a percentage of a. net sales b. net income c. gross sales d. total assets
The balance sheet for Gibson Corporation follows: Current assets Long-term assets (net) Total assets Current liabilities Long-term liabilities Total liabilities Connon stock and retained earnings Total liabilities and stockholders' equity $ 231,000 757,eee $988, eee $156,888 459,eee 615, eee 373,600 $988,eee Required Compute the following. (Round "Ratios" to 1 decimal place.) Working capital Current ratio Debt to assets ratio Debt to equity ratio 29
TABLE 1 Sales $47,000 Current assets of $ 5,100, Current liabilities $ 6,200, Cost 44,650 Net fixed assets of $51,500 Owners Equity 50, 400 Net Income 2,350 56,600 Owners Equ & Liab. 56,600 Sales are expected to increase by 3 percent next year. Net Income, that is, Net Profit Margin (NPM) is 5% of Sales. The firm has no long term debt and does not plan on acquiring any. The firm does not pay any dividends...
6. Balance Sheet Assets Liabilities Current Assets Current Liabilities Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Accounts payable . . . . . . . . . . . . . . . . . . . . . 41 Accounts receivable . . . . . . . . . . . . . ....
The most recent financial statements for 7 Seas, Inc. are shown here: Current assets Fixed assets Income Statement Sales $4,600 Costs 3,840 Taxable income 760 Taxes (35%) 266 Net income 494 Balance Sheet $6,084 Current liabilities 5,183 Long-term debt Equity $11,267 Total $1,244 2,487 7,536 $11,267 Total Assets, costs, and current liabilities are proportional to sales. Long-term debt and equity are not. The company maintains a constant 50 percent dividend payout ratio. Like every other form in its industry, next...
Assets 2018 Liabilities 2018 Cash and Cash Equivalents 63,000 Current Liabilities 40,000 Short-term Investments 3,000 Long-term Liabilities 120,000 Inventory 21,000 Total Liabilities 160,000 Accounts Receivables 20,000 Total Current Assets 107,000 Total Owners' Equity 597,000 Fixed Assets 650,000 Total Assets 757,000 What is the firm’s current ratio and quick ratio in this order? 1.58; 2.68 2.68; 1.58 1.58; 2.15 2.68; 2.15