Use the Information That Follows Taken from Campbell Company's Financial

question 86

Multiple Choice

Use the information that follows taken from Campbell Company's financial statements for the years ending December 31, 2017 and 2016.
$\begin{array}{lrr}\text { Balance Sheet Information }&2017&2016\\\hline \text { Assets}\\\text { Cash } & \$ 25 & \$ 50 \\\text { Accounts receivable } & 60 & 70 \\\text { Inventory } & 40 & 30 \\\text { Land, building, and equipment } & \underline{225} & \underline{250} \\\text { Total Assets } & \$ \underline{350} & \$ \underline{400} \\\end{array}$

$\begin{array}{l}\text { Liabilities and Shareholders' Equity }\\\hline \text { Accounts payable } & \$ 85 & \$ 100 \\\text { Long term note payable } & 180 & 200 \\\text { Common stock } & 150 & 150 \\\text { Retained earnings } & \underline{(65) } &\underline{ (50) } \\\text { Total Liabilities \& Shareholders' Equity }& \underline{\$ 350 }& \underline{\$ 400 }\\\end{array}$

$\begin{array}{lr}\text { Income Statement Information }\\\text { Sales (all sales are on credit) } & \$ 850 \\\text { Cost of goods sold } & \underline{425} \\\text { Gross profit } & {425}\\\text { Operating expenses } & \underline{ 440} \\\text { Net income } &\$(15) \end{array}$
Calculate Campbell's debt to equity ratio as of December 31, 2017. Also assume that in Campbell's industry, the industry average debt to equity ratio is 2.75 as of December 31, 2017.

• A)Campbell's debt to equity ratio is 3.12
• B)Campbell's debt to equity ratio was better than average for the industry.
• C)Campbell's debt to equity is equal to the average for the industry.
• D)Both a and b above, but not c

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