The financial manager at Sips and Chips, a local restaurant, has calculated the debttoassets ratio at 42% compared to an industry average of 1.23. This means that Sips and Chips:
A) is much more dependent on debt than the average local restaurant.
B) is at risk of being unable to pay its short term debts when they come due.
C) has much less debt than the average local restaurant.
D) has much more debt than the average local restaurant.

Question

The financial manager at Sips and Chips, a local restaurant, has calculated the debt­to­assets ratio at 42% compared to an industry average of 1.23. This means that Sips and Chips:
A) is much more dependent on debt than the average local restaurant.
B) is at risk of being unable to pay its short­ term debts when they come due.
C) has much less debt than the average local restaurant.
D) has much more debt than the average local restaurant.

Quizplus · Accepted Answer

The debt-to-assets ratio of 42% indicates that Sips and Chips has less debt compared to the industry average of 1.23 (or 123%).

The Financial Manager at Sips and Chips, a Local Restaurant