Answered

1. You are given the following table. Fill in the missing values.

\begin{tabular}{|c|c|c|c|c|}
\hline
Ratio & Debt Ratio & Debt & Equity & Assets \\
\hline
0 & (1) & (2) & Br. 100,000 & (d) \\
\hline
(b) & 0.5 & (g) & Br. 75,000 & (h) \\
\hline
1.5 & (i) & (e) & (7) & Br. 150,000 \\
\hline
(j) & (k) & Br. 50,000 & (l) & Br. 175,000 \\
\hline
\end{tabular}

2. Handush Spare Parts Enterprise has current assets of Br. 60,000 and current liabilities of Br. 30,000. What immediate impact (increase, decrease, or no effect) would each transaction have on the firm's current ratio?

a) Collect Br. 5,000 of accounts receivable in cash

b) Purchase Br. 10,000 of inventories on short-term credit

c) Sell Br. 150,000 of fixed assets for cash



Answer :

GinnyAnswer
Let's first address the missing values in the given table.

### Debt Equity Table Calculations

1. Row 1:
- Debt ratio = 0
- Debt = 0
- Equity = Br. 100,000
- Assets = Debt + Equity = 0 + Br. 100,000 = Br. 100,000

Filled row:
[tex]\[ \begin{array}{|c|c|c|c|c|} \hline 0 & 0 & 0 & \text{Br. 100,000} & \text{Br. 100,000} \\ \hline \end{array} \][/tex]

2. Row 2:
- Debt ratio = 0.5
- Equity = Br. 75,000
- Debt = Debt ratio Equity = 0.5 Br. 75,000 = Br. 37,500
- Assets = Debt + Equity = Br. 37,500 + Br. 75,000 = Br. 112,500

Filled row:
[tex]\[ \begin{array}{|c|c|c|c|c|} \hline 0.5 & 0.5 & \text{Br. 37,500} & \text{Br. 75,000} & \text{Br. 112,500} \\ \hline \end{array} \][/tex]

3. Row 3:
- Debt ratio = 1.5
- Assets = Br. 150,000
- Let equity be [tex]\( x \)[/tex].
- Assets = Debt + Equity
- Given a Debt ratio of 1.5: Debt = 1.5 Equity
- Therefore, Assets = (1.5 Equity) + Equity
- Br. 150,000 = (1.5 Equity) + Equity
- Br. 150,000 = 2.5 Equity
- Equity = Br. 150,000 / 2.5 = Br. 60,000
- Debt = 1.5 Equity = 1.5 Br. 60,000 = Br. 90,000

Filled row:
[tex]\[ \begin{array}{|c|c|c|c|c|} \hline 1.5 & 1.5 & \text{Br. 90,000} & \text{Br. 60,000} & \text{Br. 150,000} \\ \hline \end{array} \][/tex]

4. Row 4:
- Let the Debt ratio = [tex]\( x \)[/tex]
- Debt = Br. 50,000
- Assets = Br. 175,000
- Equity = Assets - Debt = Br. 175,000 - Br. 50,000 = Br. 125,000
- Debt ratio = Debt / Assets = Br. 50,000 / Br. 175,000 ≈ 0.2857

Filled row:
[tex]\[ \begin{array}{|c|c|c|c|c|} \hline 0.2857 & 0.2857 & \text{Br. 50,000} & \text{Br. 125,000} & \text{Br. 175,000} \\ \hline \end{array} \][/tex]

### Current Ratio Calculations

Handush spare parts Enterprise has current assets of Br. 60,000 and current liabilities of Br. 30,000.

1. Initial Current Ratio:
[tex]\[ \text{Initial Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}} = \frac{Br. 60,000}{Br. 30,000} = 2.0 \][/tex]

2. Transaction Impact Analysis:
- a) Collect Br. 5,000 of accounts receivable in cash:
- Collecting accounts receivable in cash will not change the total amount of current assets.
[tex]\[ \text{Current Ratio_a} = \frac{Br. 60,000}{Br. 30,000} = 2.0 \][/tex]
- b) Purchase Br. 10,000 of inventories on short-term credit:
- Current Assets increase by Br. 10,000
- Current Liabilities increase by Br. 10,000
[tex]\[ \text{Current Ratio_b} = \frac{Current Assets + Br. 10,000}{Current Liabilities + Br. 10,000} = \frac{Br. 60,000 + Br. 10,000}{Br. 30,000 + Br. 10,000} = \frac{Br. 70,000}{Br. 40,000} = 1.75 \][/tex]
- c) Sell Br. 150,000 of fixed assets for cash:
- Current Assets increase by Br. 150,000 (as cash is added)
[tex]\[ \text{Current Ratio_c} = \frac{Current Assets + Br. 150,000}{Current Liabilities} = \frac{Br. 60,000 + Br. 150,000}{Br. 30,000} = \frac{Br. 210,000}{Br. 30,000} = 7.0 \][/tex]

### Summary:

1. Debt equity table:
\begin{array}{|c|c|c|c|c|}
\hline
\text{Ratio} & \text{Debt ratio} & \text{Debt} & \text{Equity} & \text{Assets} \\
\hline
0 & 0 & 0 & \text{Br. 100,000} & \text{Br. 100,000} \\
\hline
0.5 & 0.5 & \text{Br. 37,500} & \text{Br. 75,000} & \text{Br. 112,500} \\
\hline
1.5 & 1.5 & \text{Br. 90,000} & \text{Br. 60,000} & \text{Br. 150,000} \\
\hline
0.2857 & 0.2857 & \text{Br. 50,000} & \text{Br. 125,000} & \text{Br. 175,000} \\
\hline
\end{array}

2. Current Ratio:
\begin{array}{|c|c|}
\hline
\text{Transaction} & \text{Current Ratio} \\
\hline
\text{Initial} & 2.0 \\
\hline
\text{Collect accounts receivable} & 2.0 \\
\hline
\text{Purchase inventories on credit} & 1.75 \\
\hline
\text{Sell fixed assets for cash} & 7.0 \\
\hline
\end{array}