Kim has a net worth of -$20 000 and a debt-to-asset ratio of three.Which of the following do you know is True?

Question

Quizplus · Accepted Answer

The debt-to-asset ratio is calculated by dividing the total debt by total assets. In this case, the debt-to-asset ratio is 3, meaning that for every $1 of assets, Kim has $3 in debt.

Using algebra, we can determine that Kim's total assets are -$60,000 ($20,000 Debt-to-Asset Ratio x $10,000 Total Assets). Since Kim cannot have negative assets, we know that the answer must be C - Kim has assets of $10,000.

Kim Has a Net Worth of -$20 000 and a Debt-To-Asset