Chapter_4_Solutions_to_Book_Problems

Chapter_4_Solutions_to_Book_Problems - 1. Samantha Knight...

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Debt Assets Mortgage 25000 Checking 5000 Home Equity 10000 Savings 10350 Automobile 15000 Home 145500 Credit 1500 Automobile 19000 Total Debt 51500 Total Assets 179850 debt-to-asset ratio 0.29 Total Assets 179850 Total Debt 51500 Total equity 128350 Debt-to Equity ratio 0.4 This is the same as the debt to asset ratio, which is 28.63%. 1. Samantha Knight is applying for a small-business loan. She provides the bank with the follow accounts, $5,000; cash in savings, $10,350; home market value, $145,500; first mortgage on hous $70,000; home equity loan, $10,000; automobile market value, $19,000; automobile loan outstand $1,500. a. Calculate the debt-to-asset ratio . b. Calculate the debt-to-equity ratio. c. What percentage of Samantha’s assets are owned by others? De Eq Total D Total ratio equity to Debt =
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wing information: cash in checking se, $25,000; home equity loan limit, ing, $15,000; credit card debt, 28.63% or Assets Total Debt Total ratio asset to ebt 2863 . 0 850 , 179 $ 500 , 51 $ = = = 40.12% or uity ebt 4012 . 0 350 , 128 $ 500 , 51 $ = =
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Vertical Vertical Category 2007 2008 Current assets $7,000,000 46.67% $9,000,000 60.00% Total fixed assets 8,000,000 53.33% 6,000,000 40.00% Total assets 15,000,000 100.00% 15,000,000 100.00% Current liabilities $3,000,000 20.00% $1,000,000 6.67% Long-term debt 4,000,000 26.67% 4,000,000 26.67% Owner’s equity 8,000,000 53.33% 10,000,000 66.67% $15,000,000 100.00% $15,000,000 100.00% You receive the following partial balance sheet (Table 4-5) for 2008 and 2007 for a company that you are consider a vertical analysis for each year on these accounts. Compare the two years, and in a sentence describe those change detrimental to this company. Table 4-5 Balance Sheet, Sample Company Analysis 2007 Analysis 2009 Total liabilities & owner’s equity The beneficial items include the fact that fixed assets decreased by the same amount that current as current liabilities decreased and owner’s equity increased. The detrimental item may be that fixed ass which may affect the ability of the firm to earn money in the long run.
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ring investing in. Perform es that were beneficial or ssets increased and sets decreased,
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Horizontal Analysis 2007 2008 Current assets $7,000,000 $9,000,000 28.57% Total fixed assets 8,000,000 6,000,000 -25.00% Total assets 15,000,000 15,000,000 0.00% Current liabilities $3,000,000 $1,000,000 -66.67% Long-term debt 4,000,000 4,000,000 0.00% Owner’s equity 8,000,000 10,000,000 25.00% owner’s equity $15,000,000 $15,000,000 0.00% You were not totally satisfied with the vertical analysis, so you now want to run a horizontal analysis of this co 4-6. Perform a horizontal analysis on these accounts. Compare the changes in accounts, and in a sentence desc were beneficial or detrimental to this company. Table 4-6
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Chapter_4_Solutions_to_Book_Problems - 1. Samantha Knight...

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