Use the following comparative balance sheet to compute ratios as requested.
Buff Company
COMPARATIVE BALANCE SHEET
As of December 31 , Year 1 and Year 2
Assets Current assets Cash Accounts receivable Merchandise inventory Total Current assets Property, plant, and equipment Building Liabilities and Shareholders’ Equity Current liabilities Advance from customer Accounts payable Rent payable Utilities pavable Salaries payable Total Current liabilities Shareholders’ Equity Common stock, 2,000 shares Additional paid-in capital Retained eamings Total Shareholders’ equity ( Total Liabilities and shareholders’ equity Year 2$10,0006,00020,000$36,00030,000$4001,0002,0002001,000$4,6005,00040,00016.40061,400$66,000 Year 1$5,0004,00015,000$24,00030,000$5001,0001,500200800$4,0005,00040,0005,00050,000$54,000
Compute the following ratios at year end for Year 2 for Buff Company:
a. Long-term debt ratio
b. Debt-equity ratio
c. Current ratio
d. Leverage ratio
Assume that a bank loans $10,000 cash (due in 5 years) to the company on December 31 , Year 2 . Make the appropriate adjustments to the financial statements and compute the following ratios:
e. Long-term debt ratio
f. Debt-equity ratio
g. Current ratio
h. Leverage ratio
Definitions:
Spotlight Effect
The tendency to overestimate the extent to which our actions and appearance are noticed by others.
Mathematical Skills
Abilities related to the understanding, analysis, manipulation, and application of numerical and spatial concepts, crucial for solving problems and reasoning logically.
Self-efficacy
An individual's belief in their capacity to execute behaviors necessary to produce specific performance attainments.
Narcissism
Characterized by an inflated self-image and addiction to fantasy, underpinned by indifference to the needs of others and an inability to experience empathy.