Chapter 3 Answers
Total Current assets
Net fixed assets
Debt ratio=.25=Total Debt/Total Assets. Total Assets=2,000,000 (given), so Total
Debt = .25*2,000,000=500,000
Total debt= 500,000 (above) so Long-term debt = 500,000-100,000=400,000.
Current Ratio=5=Current Assets/Current Liabilities. Current Liabilities=100,000
so Current Assets = 500,000.
Total Asset Turnover (Sales / Total Assets). From this you get Sales =
Average Collection Period =30=Accounts Receivable/(Sales
# days per yr).
Rearranging, Accounts Receivable=30*(Sales/ #days/yr)=30*(3,000,000/360)=250,000
**Here we make a quick Income Statement in order to find the COGS. We know
that Sales-COGS=Gross Profit. Sales is 3,000,000 and the gross profit
profit/sales. Gross Profit =0.2*3,000,000=600,000. 3,000,000-COGS=600,000 so COGS
must = 2,400,000.
Inventory Turnover=10=COGS/Inventory. Inventory then is