Which of the following is the correct formula to calculate the debt ratio?
A) Debt ratio = Total liabilities × Total assets
B) Debt ratio = Total liabilities + Total assets
C) Debt ratio = Total liabilities - Total assets
D) Debt ratio = Total liabilities / Total assets

Question

Quizplus · Accepted Answer

The correct formula to calculate the debt ratio is total liabilities divided by total assets. Option D is the only choice that shows this formula. Option A multiplies total liabilities and total assets, which is incorrect. Option B adds total liabilities and total assets, which also gives an incorrect result. Option C subtracts total assets from total liabilities, which is also incorrect.

Which of the Following Is the Correct Formula to Calculate