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CHAPTER 3-6 - Total $208,998 $19,318 S $228,316 Total...

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Total $208,998 $19,318 S $228,316 Total liabilities and owners' equity $295,432 $29,087 S $324,519 The firm used $29,087 in cash to acquire new assets. It raised this amount of cash by increasing liabilities and owners’ equity by $29,087. In particular, the needed funds were raised by internal financing (on a net basis), out of the additions to retained earnings, an increase in current liabilities, and by an issue of long-term debt. 17. a. Current ratio = Current assets / Current liabilities Current ratio 2008 = $68,726 / $61,434 = 1.12 times Current ratio 2009 = $76,213 / $64,203 = 1.19 times b. Quick ratio = (Current assets – Inventory) / Current liabilities Quick ratio 2008 = ($67,726 – 38,760) / $61,434 = 0.49 times Quick ratio 2009 = ($76,213 – 42,650) / $64,203 = 0.52 times c. Cash ratio = Cash / Current liabilities Cash ratio 2008 = $8,436 / $61,434 = 0.14 times Cash ratio 2009 = $10,157 / $64,203 = 0.16 times d. NWC ratio = NWC / Total assets NWC ratio 2008 = ($68,726 – 61,434) / $295,432 = 2.47% NWC ratio 2009 = ($76,213 – 64,203) / $324,519 = 3.70% e. Debt-equity ratio = Total debt / Total equity Debt-equity ratio 2008 = ($61,434 + 25,000) / $208,998 = 0.41 times Debt-equity ratio 2009 = ($64,206 + 32,000) / $228,316 = 0.42 times Equity multiplier = 1 + D/E Equity multiplier 2008 = 1 + 0.41 = 1.41 Equity multiplier 2009 = 1 + 0.42 = 1.42 f.
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