Current assets are $40,000 and long-term assets are $50,000. Total liabilities are $60,000, of which current liabilities are 50%. The debt ratio is:

Question

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Current assets = $40,000
Long-term assets = $50,000
Total assets = $90,000

Current liabilities = 50% of total liabilities = 0.5 x $60,000 = $30,000
Long-term liabilities = $60,000 - $30,000 = $30,000

Total liabilities = $60,000

Debt ratio = Total liabilities / Total assets
Debt ratio = $60,000 / $90,000
Debt ratio = 0.67

Therefore, the debt ratio is 0.67 or 67%. The best choice is B).

Current Assets Are $40,000 and Long-Term Assets Are $50,000