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The Le Bleu Company has a ratio of long-term debt to long-term debt plus equity of .35 and a current ratio of 1.25. Current liabilities are $950, sales are $5,780, profit margin is 9.4 percent, and ROE is 18.2 percent. What is the amount of the firm’s net fixed assets?

This question has been answered before, but not coherently. Please show step by step! Thanks!

The Le Bleu Company has a ratio of long-term debt to long-term debt plus equity of .35 and a current ratio of 1.25. Current liabilities are $950, sales are $5,780, profit margin is 9.4 percent, and ROE is 18.2 percent. What is the amount of the firm’s net fixed assets?

Explanation / Answer

Net fixed assets = value of all fixed assets - depreciation. it can also be calculated by

debt/(debt+equity) = 0.35. current ratio = current assets/current liabilities = 1.25. current liabilities = $950

so, current assets/950 = 1.25. or current assets = 950*1.25 = 1187.5

sales = 5780. profit = 9.4% of 5780 = 543.32

ROE = net profit/equity, or 18.2% = 543.32/equity, or equity = 543.32/0.182 = 2985.275

now, debt/(debt+equity) = 0.35

debt/(debt+2985.275) = 0.35

debt/0.35 = debt+2985.275

0.65debt = 1044.846

or debt = 1607.456

so total liabilities in the liability side of balance sheet = debt+equity+current liabilities = 1607.456+2985.275+950 = 5542.73

This will be the total of asset side as well.

so, net fixed assets will be total of assets - current assets = 5542.73 - 1187.5 = 4355.23

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