layton Industries has the following account balances:

Current assets	$	17,000	Current liabilities	$	9,000
Noncurrent assets		88,000	Noncurrent liabilities		45,000
			Stockholders equity		51,000

The company wishes to raise $43,000 in cash and is considering two financing options: Clayton can sell $43,000 of bonds payable, or it can issue additional common stock for $43,000. To help in the decision process, Claytons management wants to determine the effects of each alternative on its current ratio and debt-to-assets ratio.

-1. Compute the current ratio for Claytons management. (Round your answers to 2 decimal places.)

. Compute the debt-to-assets ratio for Claytons management. (Round your answers to 1 decimal place.)

Assume that after the funds are invested, EBIT amounts to $18,500. Also assume the company pays $3,400 in dividends or $3,400 in interest depending on which source of financing is used. Based on a 40 percent tax rate, determine the amount of the increase in retained earnings that would result under each financing option.