Question

Birtle Corporation reports the following statement of financial position information for 2017 and 2018. Assets 2018 Current assets Cash Accounts receivable Inventory Total $ 43,805 16,843 BIRTLE CORPORATION 2017 and 2018 Statement of Financial Position Liabilities and Owners' Equity 2017 2018 2017 Current liabilities $ 9,279 $ 11,173 Accounts payable $ 41,060 23,683 25,760 Notes payable 16,157 42,636 46,915 $ 75,598 $ 83, 848 Total $ 57,217 Long-term debt $ 40,000 Owners' equity $272,047 $297,967 Common stock and paid-in surplus $ 50,000 Retained earnings 200,428 Total $250,428 $347,645 $381,815 Total liabilities and owners' equity $347,645 $ 60,648 $ 35,000 Fixed assets Net plant and equipment $ 50,000 236, 167 $286,167 $381,815 Total assets

NWC ratio and Debt-equity ratio?

Answer 1

Answer d.

2017:

Net Working Capital = Current Assets - Current Liabilities
Net Working Capital = $75,598 - $57,217
Net Working Capital = $18,381

NWC Ratio = Net Working Capital / Total Assets
NWC Ratio = $18,381 / $347,645
NWC Ratio = 0.053 or 5.3%

2018:

Net Working Capital = Current Assets - Current Liabilities
Net Working Capital = $83,848 - $60,648
Net Working Capital = $23,200

NWC Ratio = Net Working Capital / Total Assets
NWC Ratio = $23,200 / $381,815
NWC Ratio = 0.061 or 6.1%

Answer e.

2017:

Debt-Equity Ratio = Total Liabilities / Total Equity
Debt-Equity Ratio = (Current Liabilities + Long-term Debt) / Owners’ Equity
Debt-Equity Ratio = ($57,217 + $40,000) / $250,428
Debt-Equity Ratio = 0.39 times

2018:

Debt-Equity Ratio = Total Liabilities / Total Equity
Debt-Equity Ratio = (Current Liabilities + Long-term Debt) / Owners’ Equity
Debt-Equity Ratio = ($60,648 + $35,000) / $286,167
Debt-Equity Ratio = 0.33 times