The formula to compute the debt ratio is
A)interest expense/income from operations.
B)total liabilities/total assets.
C)income from operations/interest expense.
D)total assets/total liabilities.

Question

Quizplus · Accepted Answer

The debt ratio is calculated by dividing total liabilities by total assets. This gives a measure of the company's leverage or how much debt it has in relation to its total assets. Option A is the interest coverage ratio, which measures a company's ability to pay its interest expense with its income from operations. Option C is the inverse of the interest coverage ratio. Option D is the inverse of the debt ratio and gives the equity ratio.

The Formula to Compute the Debt Ratio Is