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  1. business
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  3. clayton industries has the following account balan

Clayton Industries has the following account balances: The company wishes to raise $49,000 in cash...

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Accounting

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Clayton Industries has the following account balances: The company wishes to raise $49,000 in cash and is considering two financing options: Clayton can sell $49,000 of bonds payable, or it can issue additional common stock for $49,000. 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. Note: Round your answers to 2 decimal places. a-2. Compute the debt-to-assets ratio for Clayton's management. Note: Round your answers to 1 decimal place. b. Assume that after the funds are invested, EBIT amounts to $18,900. Also assume the company pays $5,000 in dividends or $5,000 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

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