Paper Clip Office Supply had $24,000,000 in sales last year.Its total asset turnover was 6.0.Interest expense was $100,000 (10% on its $1,000,000 of debt).The company is financed entirely with debt and common equity.What is Paper Clip's debt ratio?

Question

Quizplus · Accepted Answer

Debt ratio = Total debt / Total assets = Interest expense / (Total asset turnover * Sales) = $100,000 / (6.0 * $24,000,000) = 25%

Paper Clip Office Supply Had $24,000,000 in Sales Last Year