Cloyton Industries has the following account balances: The company wishes to raise $40,000 in cash and is considering two financing options: Clayton can sell $40,000 of bonds payabl it can issue odditional common stock for $40,000. To help in the decision process, Cloyton's management wants to determine the effects of each altemative on its current ratio and debt-to-assets ratio. Required a-1. Compute the current ratio for Clayton's management. Note: Round your answers to 2 decimal places. a-2. Compute the debt-to-assets ratio for Cloyton's management. Note: Round your answers to 1 decimal place. a-2. Compute the debt-to-assets ratio for Clayton's management. Note: Round your answers to 1 decimal place. b. Assume that after the funds are invested, EBIT amounts to $19,800. Also assume the company pays $3,800 in dividends or $3,800 in interest depending on which source of financing is used. Based on a 30 percent tax rate, determine the amount of the increase in tetained earnings that would result under each financing option. Cloyton Industries has the following account balances: The company wishes to raise $40,000 in cash and is considering two financing options: Clayton can sell $40,000 of bonds payabl it can issue odditional common stock for $40,000. To help in the decision process, Cloyton's management wants to determine the effects of each altemative on its current ratio and debt-to-assets ratio. Required a-1. Compute the current ratio for Clayton's management. Note: Round your answers to 2 decimal places. a-2. Compute the debt-to-assets ratio for Cloyton's management. Note: Round your answers to 1 decimal place. Cloyton Industries has the following account balances: The company wishes to raise $40,000 in cash and is considering two financing options: Clayton can sell $40,000 of bonds payabl it can issue odditional common stock for $40,000. To help in the decision process, Cloyton's management wants to determine the effects of each altemative on its current ratio and debt-to-assets ratio. Required a-1. Compute the current ratio for Clayton's management. Note: Round your answers to 2 decimal places. a-2. Compute the debt-to-assets ratio for Cloyton's management. Note: Round your answers to 1 decimal place. a-2. Compute the debt-to-assets ratio for Clayton's management. Note: Round your answers to 1 decimal place. b. Assume that after the funds are invested, EBIT amounts to $19,800. Also assume the company pays $3,800 in dividends or $3,800 in interest depending on which source of financing is used. Based on a 30 percent tax rate, determine the amount of the increase in tetained earnings that would result under each financing option. Cloyton Industries has the following account balances: The company wishes to raise $40,000 in cash and is considering two financing options: Clayton can sell $40,000 of bonds payabl it can issue odditional common stock for $40,000. To help in the decision process, Cloyton's management wants to determine the effects of each altemative on its current ratio and debt-to-assets ratio. Required a-1. Compute the current ratio for Clayton's management. Note: Round your answers to 2 decimal places. a-2. Compute the debt-to-assets ratio for Cloyton's management. Note: Round your answers to 1 decimal place
