Fibonacci Property Management's balance sheet shows total liabilities of $5 million and total assets of $13 million.Interest bearing liabilities total $3 million (book value).The market value of Fibonnacci's equity is $21 million.Fibonacci's debt ratio is ________.
A).38
B).23
C).125
D).24

Question

Quizplus · Accepted Answer

Total liabilities = $5 million

Total assets = $13 million

Interest bearing liabilities = $3 million

Book value of equity = Total assets - Total liabilities - Interest bearing liabilities 
= $13 million - $5 million - $3 million 
= $5 million

Market value of equity = $21 million

Debt ratio = (Total liabilities / Total assets) x 100% 
= ($5 million / $13 million) x 100% 
= 38.46%

Rounding to the nearest whole number, the debt ratio is 38%. Therefore, the correct answer is A) 38.

Fibonacci Property Management's Balance Sheet Shows Total Liabilities of $5