11/12/21, 2:44 AM Homework #1

 
 4. Award: 20.00 points Problems? Adjust credit for all students.

Consider this simplified balance sheet for Geomorph Trading:

 
 
Current assets $ 190 $   42 Current liabilities
Long-term assets 590 245 Long-term debt
    52 Other liabilities
    441 Equity
  $ 780 $ 780  

a. Calculate the ratio of debt to equity. (Round your answer to 2 decimal places.)

Debt to equity ratio 0.77

b-1. What are Geomorph’s net working capital and total long-term capital?

Net working capital $ 148

Total long-term capital $ 686

b-2. Calculate the ratio of debt to total long-term capital. (Round your answer to 2 decimal places.)

Debt to total long-term capital 0.36

 
Explanation:

a.
Debt-to-equity ratio = total debt / equity
Debt-to-equity ratio = ($42 + 245 + 52) / $441
Debt-to-equity ratio = 0.77

b.
Net working capital = current assets – current liabilities
Net working capital = $190 – 42
Net working capital = $148

https://connect.mheducation.com/connect/eztassignment/previewAssignment.htm?assignmentId=295222945&moduleId=5235853872 1/2
11/12/21, 2:44 AM Homework #1

Long-term capital = long-term debt + equity

Long-term capital = $245 + 441
Long-term capital = $686

Debt to total long-term capital = long-term debt / long-term capital

Debt to total long-term capital = $245 / $686
Debt to total long-term capital = 0.36

References

Worksheet Difficulty: 1 Easy

https://connect.mheducation.com/connect/eztassignment/previewAssignment.htm?assignmentId=295222945&moduleId=5235853872 2/2