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Complete the following tasks:  a.   Consider the following worksheet with information extracted from a financial statement: 2018 Assets Liabilities Equity Reported ($) 500 000 100 000 400 000   An analyst makes an adjustment that decreases goodwill by $100 000 and equity (profit) by $100 000. This goodwill was acquired on consolidation, hence there are no tax adjustments. Using the worksheet approach, what would be the change in the debt to assets ratio?

Complete the following tasks:  a.   Consider the following worksheet with information extracted from a financial statement: 2018 Assets Liabilities Equity Reported ($) 500 000 100 000 400 000   An analyst makes an adjustment that decreases goodwill by $100 000 and equity (profit) by $100 000. This goodwill was acquired on consolidation, hence there are no tax adjustments. Using the worksheet approach, what would be the change in the debt to assets ratio?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Complete the following tasks: 

a.   Consider the following worksheet with information extracted from a financial statement:

2018

Assets

Liabilities

Equity

Reported ($)

500 000

100 000

400 000

 

An analyst makes an adjustment that decreases goodwill by $100 000 and equity (profit) by $100 000. This goodwill was acquired on consolidation, hence there are no tax adjustments. Using the worksheet approach, what would be the change in the debt to assets ratio? 

 

b.  Consider the following information:

 

  • Net working capital/total assets = 0.9
  • Retained earnings/total earnings = 0.15
  • EBIT/total assets = 1.1
  • MV of equity/BV of total liabilities = 2
  • Sales/total assets = 2.5

 

Compute the Z-score. Is there a likelihood of financial distress?

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