Clayton Industries has the following account balances: Current assets $ 25,000 Current liabilities $ 15,000 Noncurrent assets 79,000 Noncurrent liabilities 46,000 Stockholders’ equity 43,000 The company wishes to...

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Accounting

Clayton Industries has the following account balances:
Current assets $ 25,000 Current liabilities $ 15,000
Noncurrent assets 79,000 Noncurrent liabilities 46,000
Stockholders’ equity 43,000

The company wishes to raise $41,000 in cash and is considering twofinancing options: Clayton can sell $41,000 of bonds payable, or itcan issue additional common stock for $41,000. To help in thedecision process, Clayton’s management wants to determine theeffects of each alternative on its current ratio and debt-to-assetsratio.
Compute the current ratio for Clayton’s management currently, ifbonds are issued, and if stock is issued. (Round youranswers to 2 decimal places.)
Compute the debt-to-assets ratio for Clayton’smanagement. (Round your answers to 1 decimalplace.)
Assume that after the funds are invested, EBIT amounts to$17,200. Also assume the company pays $3,400 in dividends or $3,400in interest depending on which source of financing is used. Basedon a 40 percent tax rate, determine the amount of the increase inretained earnings that would result under each financingoption.

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i Current assets 25000 41000 66000 Current ratio Current assetsCurrent liabilities 6600015000 44 Current ratio will be same whether funds are raised through bonds or See Answer

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Current assets	$	25,000	Current liabilities	$	15,000
Noncurrent assets		79,000	Noncurrent liabilities		46,000
			Stockholders’ equity		43,000