Current assets are $200,000, long term assets are $300,000, current liabilities are $100,000, long-term liabilities are $200,000, paid-in capital is $150,000, and retained earnings total $50,000. What is the debt-to-total-assets ratio?

Question

Quizplus · Accepted Answer

Debt-to-total-assets ratio is calculated by dividing total debt by total assets.

Total debt = current liabilities + long-term liabilities = $100,000 + $200,000 = $300,000

Total assets = current assets + long-term assets = $200,000 + $300,000 = $500,000

Debt-to-total-assets ratio = total debt/total assets = $300,000/$500,000 = 0.6 or .6 to 1

Therefore, the best choice is option B.

Current Assets Are $200,000, Long Term Assets Are $300,000, Current