Reference no: EM133205445

Assume all variables remain constant, by how much ABC should change its capital expenditure to reach Accruals Ratio of 5%? present the change in amount and percentage of change. Present all calculations or how you obtained your results.

The Accruals Ratio is computed by dividing EBITDA by Capital Expenditures. In order to obtain a 5 percent Accruals Ratio, ABC would need to raise its Capital Expenditures by $4,400.

• EBITDA = $220,000
• Capital Expenditures = $14,500
• Accruals Ratio = $220,000/$14,500 = 15.17 percent
• In order for ABC to achieve an Accruals Ratio of 5%, it would be necessary for the company to raise its Capital Expenditures by a total of $4,400.
• $4,400/$14,500 = 30.34 percent
• As a result, ABC would be required to make a 30.34 percent increase in the amount it spends on capital expenditures.