Question

The Maurer Company has a long-term debt ratio of .60 and a current ratio of 1.50. Current liabilities are $980, sales are $5,110, profit margin is 9.50 percent, and ROE is 17.30 percent. What is the amount of the firm's net fixed assets?

Answer 1

Answer:

Current Ratio = Current Assets / Current Liabilities
1.50 = Current Assets / $980
Current Assets = 1.50 * $980
Current Assets = $1,470

Profit Margin = Net Income / Sales
0.095 = Net Income / $5,110
Net Income = 0.095 * $5,110
Net Income = $485.45

Return on Equity = Net Income / Total Equity
0.173 = $485.45 / Total Equity
Total Equity = $485.45 / 0.173
Total Equity = $2,806.07

Long term Debt Ratio = Long term Debt / (Current Liabilities + Long term Debt + Equity)
0.60 = Long term Debt / ($980 + Long term Debt + $2,806.07)
0.60 = Long term Debt / ($3,786.07 + Long term Debt)
$2,271.64 + 0.60 Long term Debt = Long term Debt
$2,271.64 = Long term Debt – 0.60 Long term Debt
$2,271.64 = 0.4 Long term Debt
Long term Debt = $2,271.64 /0.4
Long term Debt = $5,679.1

Total Liabilities and Equity = Total Assets
Current Liabilities + Long term Debt + Equity = Current Assets + Net Fixed Assets
$980 + $5,679.1 + $2,806.07 = $1,470 + Net Fixed Assets
$9,465.17 = $1,470 + Net Fixed Assets
Net Fixed Assets = $9,465.17 - $1,470
Net Fixed Assets = $7,995.17