A corporation reports the following year-end balance sheet data. The company's debt ratio equals: Cash $ 40,000 Current liabilities $ 75,000 Accounts receivable 55,000 Long-term liabilities 35,000 Inventory 60,000 Common stock 100,000 Equipment 145,000 Retained earnings 90,000 Total assets $ 300,000 Total liabilities and equity $ 300,000 0.58 1.27 2.07 0.37 0.63

Question

Business

Danielle Chandler

29 June, 10:19

A corporation reports the following year-end balance sheet data. The company's debt ratio equals: Cash $ 40,000 Current liabilities $ 75,000 Accounts receivable 55,000 Long-term liabilities 35,000 Inventory 60,000 Common stock 100,000 Equipment 145,000 Retained earnings 90,000 Total assets $ 300,000 Total liabilities and equity $ 300,000 0.58 1.27 2.07 0.37 0.63

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Mcneil · Answer 1

0.37

Explanation:

The formula to compute the debt ratio is shown below:

= Total liabilities : Total assets

where,

Total liabilities would be

= Current liabilities + Long term liabilities

= $75,000 + $35,000

= $110,000

And, the total assets would be

= $300,00

Now put these values to the above formula

So, the ratio would equal to

= $110,000 : $300,000

= 0.37