A firm has $100 million in current liabilities,$200 million in total long-term liabilities,$300 million in stockholders' equity,and total assets of $600 million.Calculate the debt ratio for the firm.
A)40%
B)20%
C)50%
D)33%

Question

Quizplus · Accepted Answer

Debt ratio = (Total Liabilities) / (Total Assets)
Total Liabilities = Current Liabilities + Total Long-Term Liabilities = $100 million + $200 million = $300 million

Debt ratio = $300 million / $600 million = 0.5 or 50%.

Therefore, the correct answer is C (50%).

A Firm Has $100 Million in Current Liabilities,$200 Million in Total