# Global Business Simulation Strategy Game – Glo – Bus Quiz Answers

If you’re in a business strategy class, you might take the Global Business Simulation Strategy Game, or “Glo-Bus” for short. You will most likely take two quizzes in this course, Glo-Bus Quiz 1 and Glo-Bus Quiz 2. Both quizzes will cover the fundamentals of the game and Quiz 2 in particular may have very difficult questions. Many of the questions are financial based. Here’s a sample question you’re likely to get.

Given the following data from the financial statement:

1st quarter earnings report data

(in 000 sec.)
Sales revenue \$50,000
Operating profit \$14,400
Net income \$9,555

Balance sheet data
Total current assets \$70,000
Total assets \$149,000
Total current liabilities \$26,000
LT debt (drawing against line of credit) \$33,000
Total equity \$90,000

Other financial data
Depreciation \$4000
Dividends paid \$2,250

Based on the above figures, the company’s capital structure consists of what percentages of debt and equity? (These percentages are one of the components used in determining a company’s credit rating, as explained on the help screen for GSR’s comparative financial results page.)

20% debt and 80% equity or 20:80.
27% debt and 73% equity or 27:73.
35% debt and 65% equity or 35:65.
37% debt and 63% equity or 37:63.
None of these.

So to answer this question we need to look at this income statement and conclude what is debt and equity.

The total equity shows up at \$90,000 so it’s easy.

But the really hard part is deciphering what debt is. Believe it or not, current liabilities are not part of “debt.” And this is a mistake that people make.

So the debt is just a long-term debt of \$33,000. But then what?

To find out the correct ratio, the debt ratio formula = Debt/(Debt+Equity)

[And for note the equity ratio=equity/(debt+equity)]

Or therefore 33,000/(33,000+90,000)=.268 or what is equal to 27%. Therefore, the debt ratio is 27% and the balance of 73% is equity.

The correct answer is the second!