Can somebody show I how to calculate dept to assets ratio%? This is how I do it but got the wrong answer.
dept to assets ratio=Total current liabilities / Total assets-->dept to assets ratio=295000/440000=.67 in percentage=67%. What did I do wrong?
Cullumber Company reported the following selected information at March 31.
Total current assets=233,050
Total assets=440,000
Total current liabilities=295,000
Total liabilities=364,760
Net cash provided by operation activities=61,700
Calculate the current ratio, the dept to assets ratio, and free cash flow for march 31,2022. The company paid dividends of 11,500 and spent 25,900 on capital expenditures.
To calculate the debt to assets ratio correctly, you need to use the formula:
Debt to Assets Ratio = Total Liabilities / Total Assets
In this case, the total liabilities are given as $364,760, and the total assets are given as $440,000.
Debt to Assets Ratio = $364,760 / $440,000 = 0.83
To convert this ratio into a percentage, you multiply it by 100.
Debt to Assets Ratio = 0.83 * 100 = 83%
So, the correct debt to assets ratio for this company is 83%, not 67% as you calculated.
Now let's move on to the other calculations:
1. Current Ratio:
The current ratio is calculated by dividing the total current assets by the total current liabilities.
Current Ratio = Total Current Assets / Total Current Liabilities
In this case, the total current assets are given as $233,050, and the total current liabilities are given as $295,000.
Current Ratio = $233,050 / $295,000 = 0.79
2. Free Cash Flow:
Free cash flow is calculated as the net cash provided by operating activities minus dividends paid and capital expenditures.
Free Cash Flow = Net Cash Provided by Operating Activities - Dividends Paid - Capital Expenditures
In this case, the net cash provided by operating activities is given as $61,700, dividends paid are $11,500, and capital expenditures are $25,900.
Free Cash Flow = $61,700 - $11,500 - $25,900 = $24,300
Therefore, the current ratio for March 31, 2022, is 0.79, and the free cash flow is $24,300.