The current asset section of the Excalibur Tire Company’s balance sheet consists

Question

The current asset section of the Excalibur Tire Company’s balance sheet consists of cash, marketable securities, accounts receivable, and inventories. The December 31, 2016, balance sheet revealed the following:

1)current asset

2)shareholders equity

3)non current asset

4) long term liabilities

The current asset section of the Excalibur Tire Company’s balance sheet consists of cash, marketable securities, accounts receivable, and inventories. The December 31, 2016, balance sheet revealed the following:

Explanation / Answer

1) Current Assets:   Inventory :   $ 1,000,000/-

2) Non Current Assets: ( Total Assets - Current Assets ) ie 4,000,000 - 1,000,000 = $ 3,000,000/-

3) Long term liabilities + Equity

    Total liabilities + Equity 4,000,000/-

    Current ratio: 2.2 = Current assets/ current liabilities:

                        2.2    =    1,000,000 / current liabilities

                          Current liabilities = 1,000,000/ 2.2 = 454,545

     Long term Liabilities + Equity =     4,000,000 - 454,545 = $    3,545,455/-

Debt Equity ratio: 1.5 = Debt / Equity ie debt 1.5 and equity 1

Total Long term Liability : 3,545,455,* 1.5/2.5   =   $ 2,127,273/-

4)Share holder's Equity : (3,545,455 - 2,127,273)   = $ 1,418,182/-

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