A company has $1343 in inventory, $4782 in net fixed assets, $634 in account receivable, $278 in cash, and $586 in accounts payable and $5377 in equity. What are the company's long term debt?
A company has $1343 in inventory, $4782 in net fixed assets, $634 in account receivable, $278 in cash, and $586 in accounts payable and $5377 in equity. What are the company's long term debt?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![### Determining Long-Term Debt from Financial Data
To analyze a company's financial health, it's common to examine various components of its balance sheet, such as inventory, fixed assets, receivables, cash, payables, and equity. Here's an example to illustrate how to calculate long-term debt based on given financial data.
**Example:**
A company has the following financial details:
- $1,343 in inventory
- $4,782 in net fixed assets
- $634 in accounts receivable
- $278 in cash
- $586 in accounts payable
- $5,377 in equity
**Question:** What are the company's long-term debts?
**Solution:**
To find out the company's long-term debt, we first need to understand the basic accounting equation:
\[ \text{Assets} = \text{Liabilities} + \text{Equity} \]
Given this information, let's calculate the total assets and then determine the long-term liabilities.
1. **Calculate Total Assets:**
\[ \text{Total Assets} = \text{Inventory} + \text{Net Fixed Assets} + \text{Accounts Receivable} + \text{Cash} \]
\[ \text{Total Assets} = \$1,343 + \$4,782 + \$634 + \$278 = \$7,037 \]
2. **Calculate Total Liabilities:**
Given that equity and liabilities together make up the total assets, and knowing accounts payable, we can rearrange the accounting equation to find long-term debt.
\[ \text{Liabilities} = \text{Total Assets} - \text{Equity} \]
\[ \text{Liabilities} = \$7,037 - \$5,377 = \$1,660 \]
Accounts payable are short-term liabilities. Therefore, long-term debt can be calculated as follows:
\[ \text{Long-Term Debt} = \text{Total Liabilities} - \text{Accounts Payable} \]
\[ \text{Long-Term Debt} = \$1,660 - \$586 = \$1,074 \]
Thus, the company's long-term debt is **$1,074**.
This example illustrates the process of using balance sheet components to determine long-term debt, providing valuable insights for financial analysis.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fce618159-930e-4ade-8eed-109751c2dc39%2F3e49e53d-7e68-404a-968f-1f18eb5866d8%2Frsmn5r.png&w=3840&q=75)
Transcribed Image Text:### Determining Long-Term Debt from Financial Data
To analyze a company's financial health, it's common to examine various components of its balance sheet, such as inventory, fixed assets, receivables, cash, payables, and equity. Here's an example to illustrate how to calculate long-term debt based on given financial data.
**Example:**
A company has the following financial details:
- $1,343 in inventory
- $4,782 in net fixed assets
- $634 in accounts receivable
- $278 in cash
- $586 in accounts payable
- $5,377 in equity
**Question:** What are the company's long-term debts?
**Solution:**
To find out the company's long-term debt, we first need to understand the basic accounting equation:
\[ \text{Assets} = \text{Liabilities} + \text{Equity} \]
Given this information, let's calculate the total assets and then determine the long-term liabilities.
1. **Calculate Total Assets:**
\[ \text{Total Assets} = \text{Inventory} + \text{Net Fixed Assets} + \text{Accounts Receivable} + \text{Cash} \]
\[ \text{Total Assets} = \$1,343 + \$4,782 + \$634 + \$278 = \$7,037 \]
2. **Calculate Total Liabilities:**
Given that equity and liabilities together make up the total assets, and knowing accounts payable, we can rearrange the accounting equation to find long-term debt.
\[ \text{Liabilities} = \text{Total Assets} - \text{Equity} \]
\[ \text{Liabilities} = \$7,037 - \$5,377 = \$1,660 \]
Accounts payable are short-term liabilities. Therefore, long-term debt can be calculated as follows:
\[ \text{Long-Term Debt} = \text{Total Liabilities} - \text{Accounts Payable} \]
\[ \text{Long-Term Debt} = \$1,660 - \$586 = \$1,074 \]
Thus, the company's long-term debt is **$1,074**.
This example illustrates the process of using balance sheet components to determine long-term debt, providing valuable insights for financial analysis.
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