Question

1. LaFayette Corporation provided the following financial information:

Debt to equity ratio………….……..: 0.6.

Current liabilities…………….……:  $120,000,

Long term liabilities……………….: $360,000,

Working capital…………………….: $140,000.

Questions: Based on the given information, can you please find “total assets” of the corporation:

Answer 1

Answer)

Calculation of Total assets

Total assets = Long term liabilities + Short term liabilities + Stockholders’ equity

                       = $ 360,000 + $ 120,000 + $ 800,000

                      = $ 1,280,000

Therefore the value of total assets of the company is $ 1,280,000

           

Working Notes:

Debt to equity ratio = (Long term liabilities + short term liabilities)/ Stockholders’ equity

                           0.60 = ($ 360,000 + $ 120,000)/ Stockholders’ equity

                           0.60 = $ 480,000/Stockholders’ equity

Stockholders’ equity = $ 480,000/ 0.60

                                       = $ 800,000                             

Therefore the value of stockholders’ equity is $ 800,000