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In: Finance

Wilberton’s has total assets of $537,800, net fixed assets of $412,400, long-term debt of $323,900, and...

  1. Wilberton’s has total assets of $537,800, net fixed assets of $412,400, long-term debt of $323,900, and total debt of $388,700. If inventory is $173,900, what is the current ratio? Show your calculations!

A. 1.18   
B. 0.52
C. 2.01
D. 1.94

2. NDG is a firm financed with 45 percent debt and 55 percent equity. What is the equity multiplier? Show your calculations!

  1. 100%
  2. 55%
  3. 45%
  4. 1.82

3. A firm’s total current liabilities increased from 200 to 220 within a year. You also know that the company decreased its accounts payable by 30 during the same year. What must have happened to its other current liabilities? Show your calculations OR explain your approach! (Units in thousands of dollars)

  1. increased by 20
  2. decreased by 30
  3. decreased by 50
  4. increased by 50

   

Solutions

Expert Solution

Answer to Question 1:

Correct Option is 1.94

Total assets = Current assets + Net fixed assets
$537,800 = Current assets + $412,400
Current assets = $125,400

Total debt = Current liabilities + Long-term debt
$388,700 = Current liabilities + $323,900
Current liabilities = $64,800

Current ratio = Current assets / Current liabilities
Current ratio = $125,400 / $64,800
Current ratio = 1.94

Answer to Question 2:

Correct Option is 1.82

Debt-equity ratio = Weight of debt / Weight of equity
Debt-equity ratio = 0.45 / 0.55
Debt-equity ratio = 0.82

Equity multiplier = 1 + Debt-equity ratio
Equity multiplier = 1 + 0.82
Equity multiplier = 1.82

Answer to Question 3:

Correct Option is increased by 50

Change in current liabilities = Ending current liabilities - Beginning current liabilities
Change in current liabilities = $220 - $200
Change in current liabilities = $20

Change in current liabilities = Change in accounts payable + Change in other current liabilities
$20 = -$30 + Change in other current liabilities
Change in other current liabilities = $50

jeff jeffy answered 1 year ago
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