1. If you have current ratio of 1.9, current liabilities of 6 million dollars, and long term assets of twelve million dollars

1. If you have current ratio of 1.9, current liabilities of 6 million dollars, and long term assets of twelve million dollars, and equity of 8.2 million dollars what is your long term debt?

2. Using information from question 1., what is the debt to equity ratio?

3.What is the goal of financial management?

Solutions

Expert Solution

1. Computation of Long term debt

Current Assets = Current ratio * Current Liabilities = 1.9 * 6 Million = 11.4 Million

Long term Debt = Current Asset + Long term assets - Current Liabilities - Equity

Long term Debt = 11.4 Million + 12 Million - 6 Million - 8.2 Million

Long term Debt = $9.2 Million

2. Debt to Equity Ratio

Debt to Equity Ratio = Total Debt / Total Equity

Debt to Equity Ratio = ($6 Million + $9.2 Million) / 8.2 Million

Debt to Equity Ratio = 1.85

3. Goal of Financial Management

Goal of Financial Management is to maximize profits like Gross Profit margin, Operating Profit margin and Profit margin, Minimize the expenses and increase the market value of entity through various strategies and means.

jeff jeffy answered 1 year ago

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