Question

The Maurer Company has a long-term debt ratio of .50 and a current ratio of 1.30. Current liabilities are $950, sales are $5,180, profit margin is 9.70 percent, and ROE is 16.20 percent. What is the amount of the firm's net fixed assets?

Answer 1

Answer:

Firm's net fixed assets are $2,816.60.

Explanation:

Profit Margin = Net Profit / Sales

9.70% = Net Profit / $5,180

Net profit = $5,180 x 9.70% = $502.46

Return on Capital Employed = Net  Profit / capital employed

16.2% = 502.46 / Capital Employed

Capital Employed = 502.46 / 16.2% = $3,101.60

Capital Employed =  Total Assets - Current Liabilities

3101.60 = Total Assets - 950

Total assets = 3101.60 + 950 = $4,051.60

Current ratio = Current Assets /  Currrent Liabilities

1.30 = Current assets / 950

Currrent Assets = 950 x 1.30 = $1,235

Total assets = Fixed assets + Current Assets

4051.60 = Fixed assets + 1235

Fixed Assets = 4051.60 - 1235 = $2816.60