If Topeka Enterprises has a debt ratio of 40 percent, it means that for every $1 in ______, the firm has 40 cents in ______.
A) owners' equity; liabilities
B) owners' equity; assets
C) assets; owners' equity
D) assets; liabilities

Question

Quizplus · Accepted Answer

A debt ratio of 40 percent means that for every $1 in assets, the firm has 40 cents in liabilities. This is because the debt ratio is calculated by dividing total liabilities by total assets.

If Topeka Enterprises Has a Debt Ratio of 40 Percent