This is Crowthorne Ltd's balance sheet at year-end.
Current assets $210 000
Long-term assets 390 000
Current liabilities 90 000
Long-term liabilities 150 000
Share capital 160 000
Retained earnings 200 000
The debt ratio is:

Question

Quizplus · Accepted Answer

The debt ratio is calculated by dividing the total liabilities by total assets. 
Total liabilities = current liabilities + long-term liabilities = $90,000 + $150,000 = $240,000. 
Total assets= current assets + long-term assets = $210,000 + $390,000 = $600,000. 
Debt ratio = total liabilities/total assets = $240,000/$600,000 = 0.4 or 40%. Therefore, the correct answer is B.

This Is Crowthorne Ltd's Balance Sheet at Year-End