The debt to total assets ratio is computed by dividing
A) long-term liabilities by total assets.
B) total debt by total assets.
C) total assets by total debt.
D) total assets by long-term liabilities.

Question

Quizplus · Accepted Answer

The debt to total assets ratio is a solvency ratio that reflects the proportion of assets financed with debt. It is computed by dividing total debt (which includes both short-term and long-term debt) by total assets. This ratio indicates the extent to which the company's assets are funded by debt, and therefore, the higher the ratio, the riskier the company's solvency position.

The Debt to Total Assets Ratio Is Computed by Dividing