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Homework answers / question archive / Use the following Lowell Inc
Use the following Lowell Inc. information for Questions 1 to 13.
Lowell Inc.
2005
2006
Sales
$3,500
$4,200
Cost of Goods Sold
1,850
2,190
Interest
310
320
Selling, General and Administrative Expense
200
210
Dividends
144
196
Depreciation
320
360
Cash
445
206
Receivables
290
350
Current liabilities
1,100
1,250
Inventory
1,166
1,090
Longterm debt
5,535
4,200
Net fixed assets
8,000
7,500
Tax rate
30% 30%
What is the LI’s total debt ratio for 2006?
a. 0.67
b. 1.16
c. 0.44
d. 1.62
e. 0.60
Answer
e .
Explanation
Computation of Total Debt Ratio:
Total Debt Ratio = Total Debt / Total Assets
Here,
Total Debt = Current Liabilities + Long term Debt = $1,250+$4,200 = $5,450
Total Assets = Cash + Receivables + Inventory + Net Fixed Assets
= 206+350+1090+7500
Total Assets = 9,146
Total Debt Ratio = $5,450/$9,146 = 0.60
