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Consider this simplified balance sheet for Geomorph Trading: Current assets $ 120 $ 56 Current liabilities Long-term assets 520 260 Long—term debt 66 Other liabilities 258 Equity $ 640 $ 640 a
Consider this simplified balance sheet for Geomorph Trading:
Current assets $ 120 $ 56 Current liabilities Long-term assets 520 260 Long—term debt 66 Other liabilities 258 Equity $ 640 $ 640
a. Calculate the ratio of debt to equity. (Round your answer to 2 decimal places.)
Debt to equity ratio
b-1. What are Geomorph's net working capital and total long-term capital?
Net working capital Total long-term capital
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
Expert Solution
a) Debt to Equity Ratio = Total liabilities / Equity
= $640/$258
= 2.48
b) Long-term debt ratio = Total long-term debt / Total long-term capital
= $260 / ($260 + $258)
= 0.50
c) Net working capital = Current assets - Current liabilities
= $120 - $56
= $64
d) Current ratio = Current assets / Current liabilities
= $120 / $56
= 2.14
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