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 |
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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%
