Question 4. An entity has $330 000 of assets including current assets of $90 000....
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Accounting
Question 4.
An entity has $330 000 of assets including current assets of $90 000. The
following information has also been ascertained about the entity:
The two owners have contributed $75 000 each.
The entity has always distributed all the profits via a family trust.
The entity owes $65 000 to trade creditors and other creditors.
The remainder of the entitys financing is via a mortgage loan.
The entity made a profit this year (before tax) of $35 000.
The profit figure includes $15 000 of interest associated with the loan.
Required
Which of the following statements is correct?
a. The entitys current ratio is 2:1.
b. The entity uses more debt financing that equity financing.
c. The entitys net assets are $265 000.
d. The entitys debt ratio is 55 per cent.
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