Question

The Maurer Company has a long-term debt ratio of .40 and a current ratio of 1.50. Current liabilities are $970, sales are $5,130, profit margin is 9.30 percent, and ROE is 16.70 percent. What is the amount of the firm's net fixed assets?

Multiple Choice

• $3,571.03

• $4,276.38

• $5,731.38

• $1,904.55

• $2,874.55

Answer 1

This question needs to be solved in following two parts:

1. Solve the ROE equation For debt and equity values:
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   • We are given the debt ratio =0.40
     • this is Debt to equity ratio
     • This means that if debt = 0.4 times, then equity =1 times
     • if we add up debt and equity, we get the total capital = 1.40 times
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2. Solve for current assets:
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3. Find the Assets from the accounting equation:
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4. Subtract current assets from total assets to find the fixed assets
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