Flum Packages, Inc The Company Earns 5 Percent on Current Assets and 15

question 214

Multiple Choice

Flum Packages, Inc.

$\begin{array}{lrlr}\text { Assets }&&\text { Liabilities \& Equity }\\\hline \text { Current assets } & \$ 10,000 & \text { Current Liabilities } & \$ 5,000 \\\text { Fixed assets } & 20,000 & \text { Long-term debt } & 12,000 \\& & \text { Equity } & 13,000\\&----&&---\\\text { Total }&\$30,000&\text { Total }&\$30,000\\\end{array}$
The company earns 5 percent on current assets and 15 percent on fixed assets. The firm's current liabilities cost 7 percent to maintain and the average annual cost of long-term funds is 20 percent.
-The firm's initial ratio of current to total asset is___________

• A) 3:2
• B) 3:1
• C) 1:3
• D) 2:3

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