A firm has total assets of $50 million and owner's equity of $40 million. What is the firm's debt ratio?
A) 20 percent
B) 30 percent
C) 50 percent
D) 70 percent

Question

Quizplus · Accepted Answer

The firm's debt ratio is calculated as (Total Assets - Owner's Equity) / Total Assets. Here, it is ($50 million - $40 million) / $50 million = $10 million / $50 million = 0.20 or 20 percent.

A Firm Has Total Assets of $50 Million and Owner's