At year-end 2010, Bertin Inc.'s total assets were $1.2 million and its accounts payable were $375,000. Sales, which in 2010 were $2.5 million, are expected to increase by 25% in 2011. Total assets and accounts payable are proportional to sales, and that relationship will be maintained. Bertin typically uses no current liabilities other than accounts payable. Common stock amounted to $425,000 in 2010 and retained earnings were $295,000. Bertin has arranged to sell $75,000 of new common stock in 2011 to meet some of its financing needs. The remainder of its financing needs will be met by issuing new long-term debt at the end of 2011. (Because the debt is added at the end of the year, there will be no additional interest expense due to the new debt.) Its profit margin on sales is 6%, and 40% of earnings will be paid out as dividends.
What were Bertin's total long term debt and total liabilities in 2010?
Also, how much new long term debt financing will be needed in 2011?
Would you say that business owners may still find themselves in debt even with good financial practices?© BrainMass Inc. brainmass.com October 25, 2018, 7:27 am ad1c9bdddf
The solution is compromised of an attached Excel spreadsheet in which the long term debt and total liabilities of Bertin Inc. are calculated plainly.
Balance Sheet and Market Value of General Mills
Refer to General Mills most recent balance sheet. Review the "liabilities and equity side" of the balance sheet.
A) Short term liabilities (or debt) and long term liabilities. Find out from the balance sheet of the company the total of the short term liabilities (also called 'short term debt') and long term liabilities (also called 'long term debt')
B) Equity, The market value of equity is by definition equal to the number of shares outstanding times the market price per share. Find out the number of shares outstanding and the recent price per share. Then multiply one by the other in order to find the market value of equity of your company. If you have a problem finding out the number of shares outstanding you may go to http://finance.google.com and insert the name of your company. The market value of equity of your company is what is called 'Mkt Cap' (that is, Market Capitalization) that is market capitalization. An alternative site is http://finance.yahoo.com where again you insert your company's name and get the market capitalization.
C) Compute the debt ratio of your company (total liabilities divided by the total liabilities plus equity) and the debt to equity ratio, (total liabilities divided by total equity). Also, show these two ratios for short-term liabilities only and for long-term liabilities only (instead of total liabilities use just short-term liabilities and long-term liabilities). Show all of your work and calculations.
D) Give your recommendations as to whether or not you consider these ratios to be too small or too large. Should your SLP company increase its debt or take steps to pay off its debt?
E) Compute the debt to equity ratios to two other companies in the same industry as your SLP company. Which of these three companies has the highest debt to equity ratio, and why do you think it chose to have a relatively high ratio? Which of these three companies has the lowest debt to equity ratio, and why do you think it chose to have a relatively lower ratio?View Full Posting Details