Jordan Manufacturing reports the following capital structure:
$\begin{array}{llcc}
\text { Current liabilities } & \$100,000 \
\text { Long-term debt } &400,000\
\text {Deferred income taxes } &10,000\
\text { Preferred stock } &80,000\
\text {Common stock } &100,000\
\text { Premium on common stock } &180,000\
\text { Retained earnings } &170,000\
\end{array}$

What is the debt ratio?
A)0.48
B)0.49
C)0.93
D)0.96
E)None of the answers are correct.

Question

Jordan Manufacturing reports the following capital structure:
$\begin{array}{llcc}
  \text { Current liabilities } & \$100,000 \
 \text { Long-term debt } &400,000\
 \text {Deferred income taxes  } &10,000\
 \text { Preferred stock } &80,000\
 \text {Common stock  } &100,000\
 \text { Premium on common stock } &180,000\
 \text { Retained earnings } &170,000\
\end{array}$

What is the debt ratio?
A)0.48
B)0.49
C)0.93
D)0.96
E)None of the answers are correct.

Quizplus · Accepted Answer

The debt ratio is calculated as total liabilities divided by total assets. Total liabilities are $100,000 (current liabilities) + $400,000 (long-term debt) + $10,000 (deferred income taxes) = $510,000. Total assets are the sum of liabilities and equity: $510,000 (total liabilities) + $80,000 (preferred stock) + $100,000 (common stock) + $180,000 (premium on common stock) + $170,000 (retained earnings) = $1,040,000. The debt ratio is $510,000 / $1,040,000 = 0.49.

Jordan Manufacturing Reports the Following Capital Structure What Is the Debt Ratio? A)0

Jordan Manufacturing Reports the Following Capital Structure What Is the Debt Ratio?
A)0