Exercise 10-25A Determining the effects of financing alternatives on ratios LO 10-8 Clayton Industries has the following account balances: Current assets Noncurrent assets $ 27,000 75,000 Current Habilities Noncurrent liabilities Stockholders' equity $ 9,000 57,898 36,000 The company wishes to raise $46,000 in cash and is considering two financing options: Clayton can sell $46,000 of bonds payable, or it can issue additional common stock for $46,000. 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 a-1. Compute the current ratio for Clayton's management (Round your answers to 2 decimal places.) Currently ir bonds are issued If stock is issued Current Ratio to 1 to 1 to 1 a-2. Compute the debt-to-assets ratio for Clayton's management. (Round your answers to 1 decimal place.) Debt to Assets Ratio % Currently If bonds are issued If stock is issued % % b. Assume that after the funds are invested, EBIT amounts to $12,200. Also assume the company pays $3700 in dividends or $3700 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 Stock