Snort and Smiley Incorporated has a debt ratio of .42, noncurrent liabilities of $20,000, and total assets of $70,000. What is Snort and Smiley's level of current liabilities?
A) $8,400
B) $9,400
C) $12,340
D) $10,600

Question

Quizplus · Accepted Answer

The debt ratio is calculated as total liabilities divided by total assets. Given a debt ratio of .42 and total assets of $70,000, the total liabilities can be calculated as 0.42 * $70,000 = $29,400. Since noncurrent liabilities are $20,000, current liabilities can be found by subtracting noncurrent liabilities from total liabilities: $29,400 - $20,000 = $9,400.

Snort and Smiley Incorporated Has a Debt Ratio of