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Rebecca Ltd is a glove manufacturer in Melbourne. The managers decide to obtain an automated machine worth $1,000,000. As a result of obtaining such a

Rebecca Ltd is a glove manufacturer in Melbourne. The managers decide to obtain an automated machine worth $1,000,000. As a result of obtaining such a machine, there will be a $100,000 reduction in total expense. The managers are considering the following options:

  • Option 1: Purchase the machine with existing cash at the business bank account, assuming that Rebecca Ltd has sufficient cash at bank.
  • Option 2: The owner contributes the machine to the business.

The managers have provided you with following information prior to obtaining the machine:

Sales revenue

$500,000

Net profit

$100,000

Total current liabilities

$400,000

Total liabilities

$900,000

Total current assets

$1,500,000

Total assets

$1,900,000

Required:

Calculate the Debt (to assets) Ratio, Current Ratio and Net Profit Margin after obtaining the machine if either Option 1 or Option 2 is taken.

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