A firm has a total debt ratio of .47.This means the firm has 47 cents in debt for every:
A)$1 in total equity.
B)$.53 in total assets.
C)$1 in current assets.
D)$.53 in total equity.
E)$1 in fixed assets.

Question

Quizplus · Accepted Answer

Total debt ratio is calculated as Total Debt / Total Assets. Therefore, if the total debt ratio is 0.47, it means the total debt is 47% of total assets. So, for every $1 of total equity, the firm has $0.53 in total assets ($1-0.47) and therefore, $0.53 in total equity. Thus, the best choice is D, which states that the firm has 53 cents of equity for every $1 of debt.

A Firm Has a Total Debt Ratio of