Question

Jane is performing a vertical analysis of her hotel's financial data, which is as follows: Total revenue 500,000 Total assets4,200,000 Total liabilities 3,000,000 Long-term debt600,000 What percent should Jane report for Long-term debt?

1) 14
2) 20
3) 25
4) 60

Answer 1

The long-term debt represents 14% of the hotel's total assets after performing a vertical analysis using the given financial data.

Step-by-step explanation:

Jane is conducting a vertical analysis of her hotel's financial data and needs to calculate the percentage that long-term debt represents of the total assets. To calculate this percentage, she should use the following formula: Percentage of Long-term Debt = (Long-term Debt / Total Assets) × 100, Using the provided data: Total Assets = $4,200,000, Long-term Debt = $600,000. Inserting these values into the formula gives us: Percentage of Long-term Debt = ($600,000 / $4,200,000) × 100

This calculation results in a percentage of 14.29%, which can be rounded to 14%. Thus, Jane should report that the long-term debt represents 14% of the total assets.