Question

Building a balance sheet A firm has ($ in millions) current assets of $100, net fixed...

  1. Building a balance sheet

A firm has ($ in millions) current assets of $100, net fixed assets of $500, short-term debt of $70, and log-term debt of $200.

  • What does the balance sheet look like? __________________
  • What is shareholders’ equity?                        __________________
  • What is the net working capital?                  __________________

Assets

Liabilities and Shareholders’ equity

Total assets

Total liabilities and shareholders’ equity

What is the firm’s current liquidity ratio? _______________

What is the firms’ long-term debt ratio­­­?   _______________

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Solution: 1) What does the balance sheet look like? Assets Current Assets Net Fixed Assets Amount Liabilities and shareholders equit Amount 70 $ 200 $ 330 600 Total liabilities and shareholders equity 600 s100 Short term debt $ 500 Long-term debt Shareholders equity (600-70-200) Total Assets 2 What is shareholders equity? Total Assets Total Liabilities (600) (70+200) 330 3) Net Working capital Current Assest- Current Liabilities 100-70) 30 Below answers can be rounded per question requirement: e.g. 2 decimal or 1 4) Current liquidity ratio (Current Assets / Current Liabilities)- (I00/70) 1.43 5) long-term debt ratio (Long term debt/Total Assets)- (20O/600): 33.33%

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