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(Related to Checkpoint 4.2) (Capital structure analysis) The liabilities and owners equity for Campbell Industries is found

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Answer:

Answer to Part a)

Debt to Asset Ratio = Total Liabilities / Total Assets

Assets = Total Liabilities + Equity fund

Therefore, total assets = $ 6,834,000

Total Liabilities = Total Assets - Common Equity

Total Liabilities =$ 6,834,000– 4,947,000

Total Liabilities = $ 1,887,000

Debt to Asset Ratio = Total Liabilities / Total Assets

Debt to Assets Ratio = $ 1,887,000 / $ 6,834,000

Debt to Assets Ratio = 27.61%

Answer to Part b)

Since, the Campbell is planning to purchase a new warehouse using the long term debt for $ 1.2 million, its assets and liabilities will increase by $ 1.2 million

New Assets = $ 6,834,000 + $ 1,200,000 = $ 8,034,000

New Liabilities = $ 1,887,000+ $ 1,200,000 = $ 3,087,000

Debt to Assets Ratio = $ 3,087,000/$ 8,034,000

Debt to Assets Ratio = 38.42%

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