A ﬁrm has a total debt ratio of .47. This means that that ﬁrm has 47 cents in debt for every:
A) $1.00 in equity.
B) $1.00 in total sales.
C) $1.00 in current assets.
D) $0.53 in equity.
E) $0.53 in total assets.

Question

Quizplus · Accepted Answer

The total debt ratio of 0.47 means that 47% of the firm's total assets are financed by debt. Therefore, the remaining 53% is financed by equity. For every $0.53 in equity, there is $0.47 in debt.

A ﬁRm Has a Total Debt Ratio of