Total debt on December 31,2017,was $500,000 and total assets on the same date amounted to $1,100,000.Total debt on December 31,2016,was $460,000 and total assets on the same date amounted to $1,050,000.The debt ratio has ________ from 2016.

Question

Quizplus · Accepted Answer

The debt ratio is calculated by dividing the total debt by total assets.

Debt ratio on December 31, 2017 = $500,000 / $1,100,000 = 0.45

Debt ratio on December 31, 2016 = $460,000 / $1,050,000 = 0.44

Comparing the two ratios, we can see that the debt ratio has increased from 0.44 to 0.45, indicating that the company became more leveraged in 2017. Therefore, the correct answer is (A) increased.

Total Debt on December 31,2017,was $500,000 and Total Assets on the Same