Analyse the effect of the actions below on the debt/equity ratio. Assume current debt/equity ratio is 0.5.(v) Issuing new equity(vi) Account receivable collected(vii) Sell goods on book value, on cash basis(viii) Pay off the company’s long term bank loan Period StartPeriod EndBalance Sheet (In Millions of SGD)AssetsCurrent AssetsCash & Cash EquivalentsAccounts ReceivInventoriesOther ST AssetsNon-Current AssetsTotal AssetsLiabilitiesCurrent LiabilitiesAccounts PayableAccrued TaxesInterest & Dividends PayableOther Payables & AccrualsShort-Term DebtOther ST LiabilitiesNon-Current LiabilitiesLong-Term DebtOther LT LiabilitiesTotal LiabilitiesTotal Shareholders' EquityTotal Liabilities & Shareholders' Equity03/2109/2115,404 9,672 8,941 4,84312,9388,0557,5873,1091,1899037911911952071,08648635728,96327,90927,227 28,870 28,04444,367 37,581 36,167 33,713 31,59409/20 03/20 09/19 03/1903/2109/2003/20 09/195,6702,216 2,11713422,3353,5511,435699 1,39123923468249144,3675,713 6,855 11,0022,307 3,0167095723381,1211,3991,4333,1542,200 2,1133,046 4,78016,36215,590 13,668 12,978 10,69613,949 12,9388,6317,4279,7163,952 4,348 3,2692,414 2,65222,032 21,303 20,523 23,980 19,39669468,7003,101781,3434,17816,278 15,645 9,733 12,19837,581 36,167 33,713 31,594

Answered: Analyse the effect of the actions below…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

Analyse the effect of the actions below on the debt/equity ratio. Assume current debt/equity ratio is 0.5. (v) Issuing new equity (vi) Account receivable collected (vii) Sell goods on book value, on cash basis (viii) Pay off the company’s long term bank loan

Period Start
Period End
Balance Sheet (In Millions of SGD)
Assets
Current Assets
Cash & Cash Equivalents
Accounts Receiv
Inventories
Other ST Assets
Non-Current Assets
Total Assets
Liabilities
Current Liabilities
Accounts Payable
Accrued Taxes
Interest & Dividends Payable
Other Payables & Accruals
Short-Term Debt
Other ST Liabilities
Non-Current Liabilities
Long-Term Debt
Other LT Liabilities
Total Liabilities
Total Shareholders' Equity
Total Liabilities & Shareholders' Equity
03/21
09/21
15,404 9,672 8,941 4,843
12,938
8,055
7,587
3,109
1,189
903
791
191
195
207
1,086
486
357
28,963
27,909
27,227 28,870 28,044
44,367 37,581 36,167 33,713 31,594
09/20 03/20 09/19 03/19
03/21
09/20
03/20 09/19
5,670
2,216 2,117
134
22,335
3,551
1,435
699 1,391
239
234
682
491
44,367
5,713 6,855 11,002
2,307 3,016
70
95
72
338
1,121
1,399
1,433
3,154
2,200 2,113
3,046 4,780
16,362
15,590 13,668 12,978 10,696
13,949 12,938
8,631
7,427
9,716
3,952 4,348 3,269
2,414 2,652
22,032 21,303 20,523 23,980 19,396
69
46
8,700
3,101
78
1,343
4,178
16,278 15,645 9,733 12,198
37,581 36,167 33,713 31,594

Expert Solution

Step 1

Debt Equity Ratio is used to measure the company's total debt in relation to the equity i.e. amount invested by the owners and retained earnings over time. A debt-equity ratio of 1 to 1.5 is considered ideal depending on the type of industry.

A Debt-Equity ratio of 1.5 means that for every $1 of equity, the company has $1.5 of debt. This is considered to be ideal because more of equity can be costly and inefficient for the company and more of debt would mean financial trouble for the company.

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions