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:
Indifference Map
A set of indifference curves, each representing a different level of utility, that together show the preferences of a consumer.
Budget Line
A graphical representation of all possible combinations of two goods that can be purchased with a given budget at fixed prices.
Money Income
The total amount of monetary earnings or inflow received by an individual or entity, typically measured within a certain time period.
Budget Line
A graphical depiction of all possible combinations of two goods that can be purchased with a fixed amount of income, given their prices.