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14 January, 17:51

The Maurer Company has a long-term debt ratio of. 60 and a current ratio of 1.70. Current liabilities are $920, sales are $5,160, profit margin is 9.50 percent, and ROE is 18.50 percent. What is the amount of the firm's net fixed assets?

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  1. 14 January, 17:59
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    The amount of the firm's net fixed assets $7,361.

    Explanation:

    Long term debt ratio = 0.60

    Current Ratio = Current Assets / Current Liabilities

    1.70 = Current Assets / 920

    $920 x 1.70 = Current Asset

    Current Assets = $1,564

    Profit margin = Net profit / sales

    9.50% = Net profit / 5,160

    Net profit = 0.0950 x 5,160

    Net profit = $490.2

    Return on equity = Net profit / Shareholder's Equity

    18.50% = 490.2 / shareholder's equity

    Shareholder's Equity = 490.2 / 0.018.5

    Shareholder's Equity = $2,650

    Suppose

    Total Assets = A

    Using Accounting Equation

    Asset = Liabilities + Equity

    A = (0.6A + $920) + $2,650

    A = 0.6A + 920 + 2650

    A = 0.6A + 3570

    A - 0.6A = 3570

    0.4A = 3570

    A = 3570 / 0.4

    A = 8,925

    Total Assets = $8,925

    Fixed Assets = 8925 - 1564

    Fixed Assets = $7,361
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