. Fill out the missing items on the Kim, Inc.’s balance sheet based on the ratios given below:
Cash and marketable securities 800
current liabilities ?
Accounts Receivables ?
Long term Debt ?
Inventory ?
Equity ?
Fixed Assets ?
TOTAL ASSETS $8800
TOTAL LIABILITIES
AND EQUITY ?
Current Ratio 1.2
Quick Ratio 0.6
Total Assets
Turnover Ratio 0.7272
Accounts Receivable Turnover Ratio 4.0
Debt-Equity Ratio 2.143
To fill out the missing items on Kim, Inc.'s balance sheet, we can use the given ratios and the total assets provided.
1. Start by finding the current liabilities using the current ratio.
- Current Ratio = Current Assets / Current Liabilities
- Given: Current Ratio = 1.2 and Current Assets = $800
- Solve for Current Liabilities: Current Liabilities = Current Assets / Current Ratio
- Current Liabilities = $800 / 1.2
2. Next, calculate the accounts receivables using the accounts receivable turnover ratio.
- Accounts Receivable Turnover Ratio = Net Credit Sales / Average Accounts Receivable
- Given: Accounts Receivable Turnover Ratio = 4.0 and Total Assets Turnover Ratio = 0.7272
- Net Credit Sales = Total Assets / Total Assets Turnover Ratio
- Average Accounts Receivable = Net Credit Sales / Accounts Receivable Turnover Ratio
- Accounts Receivables = Average Accounts Receivable / Accounts Receivable Turnover Ratio
3. Calculate long-term debt using the debt-equity ratio.
- Debt-Equity Ratio = Total Liabilities / Equity
- Given: Debt-Equity Ratio = 2.143
- Solve for Long-Term Debt: Long-Term Debt = Debt-Equity Ratio * Equity
4. Calculate the inventory based on the quick ratio.
- Quick Ratio = (Current Assets - Inventory) / Current Liabilities
- Given: Quick Ratio = 0.6, Current Assets = $800, and Current Liabilities (from step 1)
- Solve for Inventory: Inventory = Current Assets - (Quick Ratio * Current Liabilities)
5. Calculate equity using the equation: Equity = Total Assets - Total Liabilities
6. Finally, calculate the fixed assets by subtracting the sum of cash and marketable securities, accounts receivables, inventory, current assets, and equity from the total assets provided.
By following these calculations, you will be able to fill out the missing items on Kim, Inc.'s balance sheet based on the given ratios and total assets.