Assume the following data: Long-term debt = 100; Value of leases = 20; Book value of equity = 80. Calculate the debt ratio.
A)0.50
B)0.55
C)0.56
D)0.60

Question

Quizplus · Accepted Answer

The debt ratio is calculated as total debt divided by total assets. Total debt includes long-term debt and the value of leases, which is 100 + 20 = 120. Total assets are the sum of total debt and book value of equity, which is 120 + 80 = 200. Therefore, the debt ratio is 120 / 200 = 0.60.

Assume the Following Data: Long-Term Debt = 100; Value of Leases