Current assets are $200,000, long term assets are $300,000, current liabilities are $100,000, long-term liabilities are $200,000, paid-in capital is $150,000, and retained earnings total $50,000. What is the debt-to-total-assets ratio?

Question

Quizplus · Accepted Answer

To calculate the debt-to-total-assets ratio, we need to determine the total debt and the total assets of the company.
Total debt is the sum of current liabilities and long-term liabilities:
Total debt = Current liabilities + Long-term liabilities
Total debt = $100,000 + $200,000
Total debt = $300,000
Total assets are the sum of current assets and long-term assets:
Total assets = Current assets + Long-term assets
Total assets = $200,000 + $300,000
Total assets = $500,000
Now, we can calculate the debt-to-total-assets ratio by dividing the total debt by the total assets:
Debt-to-total-assets ratio = Total debt / Total assets
Debt-to-total-assets ratio = $300,000 / $500,000
Debt-to-total-assets ratio = 0.6 or .6 to 1
Therefore, the correct answer is:
b. 0.6 or .6 to 1

Current Assets Are $200,000, Long Term Assets Are $300,000, Current