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In: Finance

The assets of Dallas & Associates consist entirely of current assets and net plant and equipment....

The assets of Dallas & Associates consist entirely of current assets and net plant and equipment. The firm has total assets of $2.7 million and net plant and equipment equals $2.2 million. It has notes payable of $155,000, long-term debt of $745,000, and total common equity of $1.45 million. The firm does have accounts payable and accruals on its balance sheet. The firm only finances with debt and common equity, so it has no preferred stock on its balance sheet. Write out your answers completely. For example, 25 million should be entered as 25,000,000. Enter negative amounts, if any, with a minus sign. What is the company's total debt? $ What is the amount of total liabilities and equity that appears on the firm's balance sheet? $ What is the balance of current assets on the firm's balance sheet? $ What is the balance of current liabilities on the firm's balance sheet? $ What is the amount of accounts payable and accruals on its balance sheet? [Hint: Consider this as a single line item on the firm's balance sheet.] $ What is the firm's net working capital? $ What is the firm's net operating working capital? $ What is the monetary difference between your answers to part f and g? $ What does this difference indicate?

Solutions

Expert Solution

a). Total Debts = Long-term Debt + Notes Payable

= $745,000 + $155,000

= $900,000

b). Total Liabilities and Equity = Total Assets

= $2.7 million

c). Current Assets = Total Assets - Net Plant & Equipment

=$2.7 million - $2.2 million

= $0.5 million

d). Current Liabilities = Total Liabilities - Total Debts

=$1.25 million - $0.9 million

= $0.35 million

e). Accounts Payable and Accruals = Current Liabilities - Notes Payable

= $350,000 - $155,000

=$195,000

f). Net Working Capital = Current Assets - Current Liabilities

= $500,000 - $350,000

= $150,000

g). Net Operating Working Capital = Current Assets - Accounts Payable and Accruals

= $500,000 - $195,000

= $ 305,000

h). Monetary difference between your answers to part f and g = $150,000 - $305,000

= $155,000

The monetary Difference indicates = Notes Payable = $155,000

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