An electric device delivers a current of [tex]$15.0 A$[/tex] for 30 seconds. How many electrons flow through it?
Answer (2)
Calculate total liabilities by summing accounts payable, accrued expenses, deferred taxes, bond (which is 0), and long-term loan: Total Liabilities = Rs 500,000.
Determine total equity by adding common stock and retained earnings: Total Equity = Rs 1,500,000.
Compute the total liabilities to assets ratio: 2 , 000 , 000 500 , 000 × 100 = 25% .
Calculate the total liabilities to equity ratio: 1 , 500 , 000 500 , 000 × 100 = 33.33% and the equity multiplier: 1 , 500 , 000 2 , 000 , 000 = 1.33 . The final answers are: a. 25% : b. 33.33% ; c. 1.33
Explanation
Understanding the Problem We are given a balance sheet and asked to calculate three financial ratios: the total liabilities to assets ratio, the total liabilities to equity ratio, and the equity multiplier. The balance sheet provides the amounts for various assets, liabilities, and equity accounts.
Calculating Total Liabilities and Equity First, we need to calculate the total liabilities. From the balance sheet, we have:
Accounts payable = Rs 100,000
Accrued expenses = Rs 100,000
Deferred taxes = Rs 100,000
Long-term loan = Rs 200,000
Bond = Rs 0 (calculated below)
To find the value of Bond, we use the accounting equation: Total Assets = Total Liabilities + Total Equity. We know Total Assets = Rs 2,000,000. We need to find Total Equity first. Total Equity = Common Stock + Retained Earnings. We know Common Stock = Rs 1,000,000. We need to calculate Retained Earnings.
Retained Earnings = Total Assets - Total Liabilities - Common Stock = 2,000,000 - (100,000 + 100,000 + 100,000 + 200,000) - 1,000,000 = 2,000,000 - 500,000 - 1,000,000 = Rs 500,000
Now we can calculate Bond: Bond = Total Assets - Total Equity - Accounts payable - Accrued expenses - Deferred taxes - Long-term loan = 2,000,000 - (1,000,000 + 500,000) - 100,000 - 100,000 - 100,000 - 200,000 = 2,000,000 - 1,500,000 - 500,000 = Rs 0
Calculating Total Equity Now we can calculate the total liabilities:
Total Liabilities = Accounts payable + Accrued expenses + Deferred taxes + Bond + Long-term loan
Total Liabilities = Rs 100,000 + Rs 100,000 + Rs 100,000 + Rs 0 + Rs 200,000 = Rs 500,000
Next, we calculate the total equity:
Total Equity = Common stock + Retained earnings
Total Equity = Rs 1,000,000 + Rs 500,000 = Rs 1,500,000
Calculating the Ratios Now we can calculate the required ratios:
a. Total liabilities to assets ratio:
Total Assets Total Liabilities × 100 = 2 , 000 , 000 500 , 000 × 100 = 0.25 × 100 = 25%
b. Total liabilities to equity ratio:
Total Equity Total Liabilities × 100 = 1 , 500 , 000 500 , 000 × 100 = 3 1 × 100 = 33.33%
c. Equity multiplier:
Total Equity Total Assets = 1 , 500 , 000 2 , 000 , 000 = 3 4 = 1.33
Therefore, the equity multiplier is 1.33 times.
Final Answer a. Total liabilities to assets ratio: 25% b. Total liabilities to equity ratio: 33.33% c. Equity multiplier: 1.33 times
Examples
Understanding financial ratios is crucial in assessing a company's financial health. For instance, the total liabilities to assets ratio indicates the proportion of a company's assets that are financed by debt. A lower ratio suggests a more financially stable company. Similarly, the equity multiplier shows how much of the company's assets are funded by equity; a higher multiplier indicates greater financial leverage. These ratios help investors and analysts make informed decisions about investing in or lending to the company. For example, a small business owner can use these ratios to track their company's performance over time and identify areas for improvement.
In 30 seconds, approximately 2.81 x 10^21 electrons flow through an electric device that delivers a current of 15.0 A. This is calculated by first determining the total charge using the formula Q = I × t, which gives 450 coulombs, and then converting that charge to the number of electrons using the charge of a single electron. Thus, about 2.81 x 10^21 electrons pass through the device during this time frame.
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