Question
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.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started