Determine the company’s (a) ratio of fixed assets to long-term liabilities and (b) ratio of liabilities to stockholders’ equity. Round to one decimal place.

The following information was taken from Sigmund Company’s balance sheet:

Fixed assets (net) $1,050,000

Long-term liabilities 750,000

Total liabilities 850,000

Total stockholders’ equity 500,000

Determine the company’s (a) ratio of fixed assets to long-term liabilities and (b) ratio of liabilities to stockholders’ equity. Round to one decimal place.

Solutions

Expert Solution

Financial ratios : Financial ratios are indicators used to assess a company's liquidity, capabilities, profitability, and overall performance.

(a) Formula for calculating Ratio of fixed assets to long term liabilites

Ratio of fixed assets to long term liabilities = Fixed assets / Long term liabilities

=$1,050,000 / $750,000

=1.4

(b)Calculation of number of Day's sales in inventory

Ratio of liabilities to stockholder's equity = Total liabilities / Stockholder's Equity

=$850,000 / $500,000

=1.7

(a)Therefore , the ratio of fixed assets to long term liabilities is 1.4

(b)Therefore, the number of day's sales in inventory is 1.7

balaji rao answered 1 year ago

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