FSA Q.

An analyst gathered the following information form a company’s 2003 financial statements: Total assets $250million Net sales $920million Current assets $55million Current liabilities $25million Long-term liabilities $110million After reviewing the footnotes to the financial statements, the analyst determined that the present value of operating lease payments for 2004 is $5 million and the present value of operating lease payments for all years after 2004 totals $60 million. Other companies in this industry have capitalized lease obligations, but no operating leases. The company’s adjusted 2003 total debt-to-total capital and total asset turnover ratios, respectively, that best compare the company to the industry are: Total debt-to-total capital ratio Total asset turnover ratio A. 63 2.9 B. 63 3.7 C. 80 2.9 D. 80 3.7

Current Liab = 25 + 5 = 30 LT Liab = 110 + 60 = 170 When Liabs are increased to the tune of 65 M, Total Assets should also be revised upwards So Total Assets = 250 + 65 = 315 Total Debt to Total Capital = 200 / 315 = 0.63 Total Asset Turnover: NI / TA = 920 / 315 = 2.92 So Choice A

cpk123 is very quick. I got the same answer.