Athena Ltd manufactures swimming goggles and sell them to retail stores. The managers decide to...
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Accounting
Athena Ltd manufactures swimming goggles and sell them to retail stores. The managers decide to obtain the new manufacturing equipment worth $850,000 to enhance the automation in production. As a result of obtaining such equipment, the businesss total expense will be reduced by $70,000. The managers are considering the following options:
Option 1: The owner contributes the equipment to Athena Ltd.
Option 2: Purchase the equipment with existing cash at the business bank account, assuming that Athena Ltd has sufficient cash at bank.
The managers have provided you with following information prior to obtaining the equipment:
Sales revenue
$600,000
Net profit
$230,000
Total non-current liabilities
$500,000
Total liabilities
$900,000
Total current assets
$1,300,000
Total assets
$1,500,000
Total equity
$600,000
Required:
Calculate the Debt to Equity Ratio, Current Ratio and Net Profit Margin afterobtaining the equipment if either Option 1 or Option 2 is taken.
(5 marks)
Option 1
Option 2
Debt to Equity Ratio
Current Ratio
Net Profit Margin
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