Question

% = 10 PV=1584957932: 0 9 Prit= 500 SPV=15849.30723) 3) Based on the following information, answer the questions. 2019 Balance Sheet Liabilities and Equity Account Receivables 3,000,000 Debt 2,500,000 Net fixed assets Me Equity Total Total Shote 550 Assets Goey BOOM00 1. Given the Account Receivables Turnover (Sales/AR) of 3, figure out Sales. Moreover, if the Total Asset Turnover (Sales/TA) is 0.9, figure out Total Asset (30points) or 5500,00 0 V ou = 1398 2. If the firm has a Total Debt ratio (TD/TA) of 1/4, figure out its Equity multiplier and Debt-to-equity ratio. (30points) 050oooo 300 que 5 =

Answer 1

1 Calculation of sales:

Accounts receivables turnover ratio = Sales / Accounts receivables

Given: Accounts receivables = $3000000, Accounts receivables turnover ratio = 3

Putting the values in the above formula, we get,

3 = Sales / $3000000

Sales = $3000000 * 3 = $9000000

Calculation of total assets:

Total assets turnover ratio = Sales / Total assets

Given: Total assets turnover ratio = 0.9, Sales = $9000000 (as calculated in previous step)

Putting the values in the above formula, we get,

0.9 = $9000000 / Total assets

Total assets = $9000000 / 0.9 = $10000000

2. Calculation of Equity multiplier:

First we will calculate the Equity. As per accounting equation,

Assets = Debt + Equity

Given: Debt = $2500000, Assets = $10000000 (as calculated in previous step)

Putting the values in the above equation, we get,

$10000000 = $2500000 + Equity

Equity = $10000000 - $2500000

Equity = $7500000

Now, formula for equity mutiplier is :

Equity mutiplier = Total assets / Equity

Putting the values in the above formula, we get,

Equity multiplier = $10000000 / $7500000

Equity multiplier = 1.333

Calculation of debt to equity ratio:

Formula for Debt to equity ratio is:

Debt to equity ratio = Debt / Equity

Putting the values in the above formula,we get,

Debt to equity ratio = $2500000 / $7500000

Debt to equity ratio = 0.333