A firm has inventory of $46,500, accounts payable of $17,400, cash of $1,250, net fixed assets of $318,650, long-termdebt of $109,500, and accounts receivable of $16,600. What is the common-size percentage of the equity?

Question

Business

Julie Hutchinson

16 May, 07:56

A firm has inventory of $46,500, accounts payable of $17,400, cash of $1,250, net fixed assets of $318,650, long-termdebt of $109,500, and accounts receivable of $16,600. What is the common-size percentage of the equity?

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Answers (1)

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Lilliana Robbins · Answer 1

Common size percentage of equity = 66.867%≈ 66.87%

Explanation:

Common size percentage is used to analyse balance sheet and income statements. It is calculated by dividing the parameter we are interested in by a base amount. For balance sheet the base amount is total asset.

In this case we are calculating common size percentage of equity.

Common size percentage of equity = Equity/Total Asset

Total asset = Cash + Inventory + Fixed assets + Accounts recievable

Total asset = 1,250 + 46,500 + 318,650 + 16,600

Total asset = $383,000

Total liabilities = long term debt + accounts payable

Total liabilities = 109,500 + 17,400

Total liabilities = $126,900

Using the accounting equation

Asset = Liabilities + Equity

Equity = Asset - Liabilities

Equity = 383,000 - 126,900 = $256,100

Therefore

Common size percentage of equity = Equity/Total Asset

CSPE = 256,100/383,000 = 0.66867

CSPE = 66.867%