If the firm's total equity is $600,000, its long-term debt is $300,000, and its current liabilities are $100,000, then its debt ratio is:

Question

Quizplus · Accepted Answer

The debt ratio is calculated by dividing the total debt of the company (long-term debt plus current liabilities) by the total equity of the company.

Debt Ratio = (Long-term debt + Current liabilities) / Total equity

= ($300,000 + $100,000) / $600,000

= 0.5

= 50%

Therefore, the correct answer is B, which is the closest answer to 50%.

If the Firm's Total Equity Is $600,000, Its Long-Term Debt