Final answer:
The simple capital structure of the firm is about 15.3% debt and 84.7% equity, which is option (A). This is calculated using the total assets of the firm, and the respective values of debt and shareholders' equity.
Step-by-step explanation:
To determine the simple capital structure of a firm, we need to consider the proportions of debt and equity that finance the firm's assets. According to the information provided, the firm has current liabilities of $450,000 and long-term debt of $200,000, which totals $650,000 in overall debt. The total shareholders' equity is given as $3,600,000.
To calculate the percentages, you can use the following formula for each component:
- Debt ratio = (Total Debt / Total Assets) × 100
- Equity ratio = (Total Shareholders' Equity / Total Assets) × 100
In this case, total assets are $4,250,000, so:
- Debt ratio = ($650,000 / $4,250,000) × 100 ≈ 15.3%
- Equity ratio = ($3,600,000 / $4,250,000) × 100 ≈ 84.7%
Therefore, the simple capital structure for this firm is about 15.3% debt and 84.7% equity, which corresponds to option (A).