A new company has a debt ratio of 0.35. What does this mean?
A) The company has $0.35 in assets for every $1.00 of liabilities.
B) The company has $0.35 in liabilities for every $1.00 of assets.
C) The company has $0.35 in sales for every $1.00 of liabilities.
D) The company has $0.35 in liabilities for every $1.00 of sales.

Question

Quizplus · Accepted Answer

The debt ratio is calculated by dividing total liabilities by total assets, indicating the proportion of a company's assets that are financed through debt. A debt ratio of 0.35 means the company has $0.35 in liabilities for every $1.00 of assets.

A New Company Has a Debt Ratio of 0