Question

A firms has net working capital of $250,500, current assets of $487,200, total assets of $1,711,000, , and long-term debt of $350,000. What is the total debt ratio?

Group of answer choices

.34

.20

.39

.28

.14

Answer 1

Total debt ratio is computed as follows;

= (long term debt + current liabilities) / Total Assets

current liabilities is computed as follows:

= Current Assets - Net working capital

= $ 487,200 - $ 250,500

= $ 236,700

So, the ratio will be as follows:

= ($ 350,000 + $ 236,700) / $ 1,711,000

= $ 586,700 / $ 1,711,000

= 0.34 Approximately