(a) The firm earns 5% on current assets and 15% on fixed assets. The firm's current liabilities cost 7% to maintain and the average annual cost of long-term funds is 20 %. Flum Packages, Inc. Current assets RM10,000 Current Liabilities RM5,000 Fixed assets RM20,000 Long-term debt RM12,000 Equity RM13,000 Total RM30,000 Total RM30,000 (i) Calculate the firm's initial net working capital. (ii) Calculate the firm's initial ratio of current assets to total assets.

(a) The firm earns 5% on current assets and 15% on fixed assets. The firm's current liabilities cost 7% to maintain and the average annual cost of long-term funds is 20 %. Flum Packages, Inc. Current assets RM10,000 Current Liabilities RM5,000 Fixed assets RM20,000 Long-term debt RM12,000 Equity RM13,000 Total RM30,000 Total RM30,000 (i) Calculate the firm's initial net working capital. (ii) Calculate the firm's initial ratio of current assets to total assets.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter13: Capital Structure Concepts

Section: Chapter Questions

Problem 6P

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Flum Packages, Inc.
Current assets	RM10,000	Current Liabilities	RM5,000
Fixed assets	RM20,000	Long-term debt	RM12,000
		Equity	RM13,000
Total	RM30,000	Total	RM30,000