Let's break down the calculation step-by-step based on the provided financial information to determine the debt-equity ratio and the quick ratio.
### Step 1: Identify Total Liabilities
From the problem statement:
- Long-Term Liabilities include Bank Loan and Notes Payable.
Let's assume:
- Bank loan = [tex]$25,000
- Notes payable = $[/tex]25,000
Total Long-Term Liabilities:
[tex]\[ \text{Total Long-Term Liabilities} = 25,000 (\text{Bank loan}) + 25,000 (\text{Notes payable}) = 50,000 \][/tex]
Since no other liabilities were defined explicitly, the Total Liabilities is:
[tex]\[ \text{Total Liabilities} = 50,000 \][/tex]
### Step 2: Determine Retained Earnings
Using the fundamental accounting equation:
[tex]\[ \text{Total Assets} = \text{Total Liabilities} + \text{Total Stockholders' Equity} \][/tex]
Where:
[tex]\[ \text{Total Stockholders' Equity} = \text{Retained Earnings} \][/tex]
Given that:
[tex]\[ \text{Total Assets} = 720,800 \][/tex]
[tex]\[ \text{Total Liabilities} = 50,000 \][/tex]
We can solve for Retained Earnings:
[tex]\[ \text{Total Stockholders' Equity} = 720,800 - 50,000 = 670,800 \][/tex]
[tex]\[ \text{Retained Earnings} = 670,800 \][/tex]
### Step 3: Compute the Debt-Equity Ratio
The Debt-Equity Ratio is calculated as:
[tex]\[ \text{Debt-Equity Ratio} = \frac{\text{Total Liabilities}}{\text{Total Stockholders' Equity}} \][/tex]
Substituting the values:
[tex]\[ \text{Debt-Equity Ratio} = \frac{50,000}{670,800} \approx 0.08 \][/tex]
Therefore:
[tex]\[ \text{Debt-Equity Ratio} = 0.08 \][/tex]
### Step 4: Compute the Quick Ratio
The Quick Ratio is calculated as:
[tex]\[ \text{Quick Ratio} = \frac{\text{Quick Assets}}{\text{Total Liabilities}} \][/tex]
Given the assumptions and provided data:
- Quick Assets = Current Assets - Inventory,
- Assume Investments are the only current assets and there's no inventory.
So, Quick Assets:
[tex]\[ \text{Quick Assets} = 25,000 \][/tex]
Substituting into the Quick Ratio formula:
[tex]\[ \text{Quick Ratio} = \frac{25,000}{50,000} = 0.5 \][/tex]
Therefore:
[tex]\[ \text{Quick Ratio} = 0.5 \][/tex]
### Conclusion
- The Debt-Equity Ratio is [tex]\( \boxed{0.08} \)[/tex].
- The Quick Ratio is [tex]\( \boxed{0.5} \)[/tex].
These ratios represent the financial stability of the organization based on the provided data. The Debt-Equity Ratio, being low at 0.08, suggests a strong equity position relative to debt, and the Quick Ratio of 0.5 indicates liquidity in terms of covering liabilities with quick assets.
