XMXH136 Posts: 2, Reputation: 1 New Member #1 Aug 21, 2012, 03:56 PM
the liabilities and owner
The liabilities and owners equity for Campbell Industries:
Accounts payable \$492,000
Notes payable \$242,000
Current liabilities=734,000
Long-term debt \$1,295,000
Common equity \$5,252,000
Total liabilities and equity=7,281,000
(a) What percentage of the firm's assets does the firm fonance using debt (liabilities0
(b) If Campbell were to purchase a new warehouse for 1.5 million and finance it entirely with long-term debt, what would be the firm's new debt ratio?

a. What percentage of the firm's assets does the firm finance using debt (liabilities)

The fraction of the firm's assets that the firm finances using debt is %. (Round to one decimal place).
I have tried and I keep reading the material over and still not able to find the correct solution. I just need the steps in order for me to solve the problem! Please help.
Thanks,
 pready Posts: 3,197, Reputation: 207 Ultra Member #2 Aug 27, 2012, 02:27 PM
First you need to know 2 things.

1. Total Assets = Total Liabilities + Owners Equity

2. Debt Ratio = Total Liabilities / Total Assets

Since Total Assets equals Total Liabilities plus Owners Equity you already know this amount. Total Assets is \$7,281,000

Now to answer question (a) the first thing you need to do is find total liabilities. So Total Liabilites = Current Liabilities + Long-Term Liabilities. Now you have Total liabilites so divide this number by total assets and multiply it by 100 to get your answer to a percentage amount.

For question (b) you will have to add \$1,500,000 to total assets to get your new total assets amount and you will have to add \$1,500,000 to your total liabilities amount to get your new total liabilities amount. Now take your new total liabilities amount and divide it by your new total assets amount and times it by 100 to get your answer to a percentage amount.
 cbanger Posts: 2, Reputation: 1 New Member #3 May 28, 2013, 12:38 PM
To what amount will \$5,000 invested for 8 years at 9% compounded annually accumulate?

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