Profit and loss data, quartered 1
(in 000s) Revenues from the sale of $ 50,000 Operating profit $ 14,400 Net income $ 9,555
Balance Sheet Data Total current assets $ 70,000 Total assets $ 149,000 Total current liabilities $ 26,000 L-T Debt (draw against credit line) $ 33,000 Total capital of $ 90,000
Other financial data Depreciation of $ 4,000 Dividends payable $ 2,250
Based on the above figures, the company's capital structure consists of what the debt and equity percentages? (These percentages are one of the components used in determining the company's credit rating, as explained in the help screen for the comparative financial performance site GSR .)
Here are 5 responses.
20% debt and 80% equity or 20:80. 27% debt and 73% equity or 27:73. 35% debt and 65% equity or 35:65. 37% debt and 63% equity or 37:63. None of these.
So, to answer this question, we must look at the income statement and conclude that the debt and equity.
Total shareholders' equity is shown at $ 90,000, so it's easy.
But the real hard part is deciphering what goes on. Believe it or not, but an ongoing commitment is part of the "debt". And it was a mistake that people make.
Therefore, the debt is simply a long-term debt of $ 33,000, however, what then?
to understand the exact ratio, the formula of debt = debt / (debt + equity)
[A note to equity ratio = equity / (debt + equity )]
Or So 33,000 / (33,000 +90,000) =. 268, or what amounts to 27%. Therefore, the debt is 27%, and the rest 73% of the capital.
The correct answer is the second one!
