Dynasty Industries reported total liabilities of ¥9,000,000 and total assets of ¥12,000,000.If the exchange rate changes to ¥110 = $1, what will be the change in the debt ratio assuming the account balances remain constant?
A)Decrease by 8.3%
B)Increase by 8.3%
C)Decrease by 9.1%
D)No change

Question

Quizplus · Accepted Answer

The debt ratio is calculated as total liabilities divided by total assets. Changes in the exchange rate do not affect this ratio if the account balances remain constant in their original currency, because both the numerator (liabilities) and the denominator (assets) would be converted at the same exchange rate, leaving the ratio unchanged.

Dynasty Industries Reported Total Liabilities of ¥9,000,000 and Total Assets