question archive The liabilities and? owners' equity for Campbell Industries is found? here:   a

The liabilities and? owners' equity for Campbell Industries is found? here:   a

Subject:FinancePrice:2.87 Bought7

The liabilities and? owners' equity for Campbell Industries is found? here:  
a.  What percentage of the? firm's assets does the firm finance using debt? (liabilities)?

b.  If Campbell were to purchase a new warehouse for $1.3 million and finance it entirely with? long-term debt, what would be the? firm's new debt? ratio?

Accounts payable $506,000
Notes payable $242,000
Current liabilities $748,000
Long-term debt $1,165,000
Common equity $4,682,000
Total liabilities and equity $6,595,000

pur-new-sol

Purchase A New Answer

Custom new solution created by our subject matter experts

GET A QUOTE

Answer Preview

Answer to Part a)

Debt to Asset Ratio = Total Liabilities / Total Assets

Assets = Total Liabilities + Equity fund

Therefore, total assets = $ 6,595,000

Total Liabilities = Total Assets - Common Equity

Total Liabilities = 6,595,000 – 4,682,000

Total Liabilities = $ 1,913,000

Debt to Asset Ratio = Total Liabilities / Total Assets

Debt to Assets Ratio = 1,913,000 / 6,595,000

Debt to Assets Ratio = 29.01%

Answer to Part b)

Since, the Campbell is planning to purchase a new warehouse using the long term debt for $ 1.3 million, its assets and liabilities will increase by $ 1.3 million

New Assets = 6,595,000 + $ 1,300,000 = $ 7,895,000

New Liabilities = $ 1,913,000 + $ 1,300,000 = $ 3,213,000

Debt to Assets Ratio = 3,213,000 / 7,895,000

Debt to Assets Ratio = 40.70%