Question

The following information was taken from Charu Company's balance sheet: Fixed assets (net) $860,000 Long-term liabilities 200,000 Total liabilities 600,000 Total stockholders’ equity 250,000 Determine the company's (a) ratio of fixed assets to long-term liabilities and (b) ratio of liabilities to stockholders' equity. If required, round your answers to one decimal place. a. Ratio of fixed assets to long-term liabilities fill in the blank 1 b. Ratio of liabilities to stockholders' equity

Answer 1

Answer:

A. 4.3

B. 2.4

Explanation:

(a) Calculation to determine ratio of fixed assets to long-term liabilities

Using this formula

Ratio of fixed assets to long-term liabilities =Fixed assets (net)/Long-term liabilities

Let plug in the formula

Ratio of fixed assets to long-term liabilities= $860,000 /$200,000

Ratio of fixed assets to long-term liabilities=4.3

Therefore Ratio of fixed assets to long-term liabilities is 4.3

(b) Calculation to determine ratio of liabilities to stockholders' equity

Using this formula

Ratio of liabilities to stockholders' equity=Liabilities/Total stockholders’ equity

Let plug in the formula

Ratio of liabilities to stockholders' equity=$600,000 /$250,000

Ratio of liabilities to stockholders' equity=2.4

Therefore ratio of liabilities to stockholders' equity is 2.4