Question

The liabilities and owners’ equity for Campbell Industries is as follows:
Accounts payable ........ $ 500,000
Notes payable ........ 250,000
Current liabilities ......... $ 750,000
Long-term debt ........ $1,200,000
Common equity ........ $5,000,000
Total liabilities and equity .... $6,950,000
a. What fraction of the firm’s assets does the firm finance using debt (liabilities)?
b. If Campbell were to purchase a new warehouse for $1 million and finance it all using long-term debt, what would happen to the firm’s debt ratio?



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  • CreatedOctober 31, 2014
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