Exercise 10-25A (Algo) Determining the effects of financing alternatives on ratios LO 10-8 Clayton Industries has the following account balances: Current assets Noncurrent assets $22,000 84,000 Current liabilities Noncurrent liabilities Stockholders' equity $ 12,000 $1,000 43,000 The company wishes to raise $31,000 in cash and is considering two financing options: Clayton can sell $31,000 of bonds payable, or it can issue additional common stock for $31,000. To help in the decision process, Clayton's management wants to determine the effects of each alternative on its current ratio and debt-to-assets ratio. Required -1. Compute the current ratio for Clayton's management. (Round your answers to 2 decimal places.) Currently f bonds are issued If stock is issued Current Ratio to 1 to 1 to 1 -2. Compute the debt-to-assets ratio for Clayton's management. (Round your answers to 1 decimal place.) Debit to Assets Rate Currently If bonds are issued stock is issued 16 b. Assume that after the funds are invested, EBIT amounts to $12,600. Also assume the company pays $5,000 in dividends or $5.000 in interest depending on which source of financing is used Based on a 30 percent tax rate, determine the amount of the increase in retained earnings that would result under each financing option, Additional Retained Earnings Bonds Dock