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    rpurv003's Avatar
    rpurv003 Posts: 2, Reputation: 1
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    #1

    May 20, 2012, 04:56 PM
    Calculate Net Fixed assets with LTD, CR, CL, Sales, PM, and ROE
    Long term Debt Ratio- .35
    Current Ratio- 1.30
    Current Liabilities- 910
    Sales- $6430
    Profit Margin- 9.5%
    Return on Equity- 18.5%

    The Answer is 4806.83 and I have tried to solve this multiple ways and cannot figure it out. Help!
    ArcSine's Avatar
    ArcSine Posts: 969, Reputation: 106
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    #2

    May 21, 2012, 04:35 AM
    • From the given Sales and Profit Margin, calculate Net Income.
    • From the calculated Net Income and the given ROE, calculate Equity.
    • Use the calculated Equity and the given LTD ratio to determine Long Term Debt.
    • From LTD and Current Liabilities calculate Total Debt.
    • Total Assets = Total Debt + Equity.
    • Fixed Assets = Total Assets minus Current Assets. You can determine Current Assets using the given Current Liabilities amount and the Current Ratio.


    In the third step above remember that the LTD ratio is calculated as .

    Check back in if your calculations are still mis-firing somewhere.
    rpurv003's Avatar
    rpurv003 Posts: 2, Reputation: 1
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    #3

    May 21, 2012, 06:38 PM
    Okay so I got Net Income by multiplying 6430 x .095 = 610.85
    I used that to get equity with 610.85/.185 = 3301.90
    I get stuck on part three, I know it is basic algebra but for some reason I am at a loss on where to continue. I used .35 = (LTD)/(LTD + 3301.90) did the first step and got .35LTD + 1155.66 =LTD and that's where I am stuck.
    ArcSine's Avatar
    ArcSine Posts: 969, Reputation: 106
    Senior Member
    		  
    #4

    May 22, 2012, 04:50 AM
    You're on the right track. From where you are, next subtract 0.35LTD from both sides, resulting in

    1155.66 = 0.65LTD

    Then divide both sides by 0.65 to solve for LTD.
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