As a bank loan officer, you are considering a loan application by Bama Bart's Sporting Goods. The company has provided you with its balance sheet and income statement, which contain the following information: the firm's only current assets are $25,000 in cash, $45,000 in accounts receivable, and $140,000 in inventory. It has no marketable securities. The firm also has $190,000 in fixed assets, but no intangible assets. It has $70,000 in current liabilities and its long-term liabilities are $90,000. By using some of this information, you can conclude that Bama Bart's debt to owners' equity ratio (rounded to the nearest tenth of a percent) is:

Question

Business

Ethen Osborne

9 December, 13:21

As a bank loan officer, you are considering a loan application by Bama Bart's Sporting Goods. The company has provided you with its balance sheet and income statement, which contain the following information: the firm's only current assets are $25,000 in cash, $45,000 in accounts receivable, and $140,000 in inventory. It has no marketable securities. The firm also has $190,000 in fixed assets, but no intangible assets. It has $70,000 in current liabilities and its long-term liabilities are $90,000. By using some of this information, you can conclude that Bama Bart's debt to owners' equity ratio (rounded to the nearest tenth of a percent) is:

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Alina Erickson · Answer 1

debt to owners' equity ratio 67%

Explanation:

debt to owner's equity:

Cash 25,000

Accounts receivable 45,000

Inventory 140,000

Total current assets 210,000

Fixed Assets 190,000

Total Assets: 400,000

Liablities 70,000 + 90,000 = 160,000

Using the accounting equation we solve for equity:

Assets = Liabilies + Equity

400,000 = 160,000 + Equity

400,000 - 160,000 = Equity = 240,000

debt to equity:

160,000/240,000 = 0.67