BUSINESS ADMINISTRATION
FINANCIAL MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Total Liabilities/Total Shareholder’s Equity
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Total Liabilities/Total Assets
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Total Liabilities/Average Total Assets
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Total Assets/Total Liabilities
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Detailed explanation-1: -A company’s debt ratio can be calculated by dividing total debt by total assets. A debt ratio of greater than 1.0 or 100% means a company has more debt than assets while a debt ratio of less than 100% indicates that a company has more assets than debt.
Detailed explanation-2: -Your debt-to-income ratio (DTI) is all your monthly debt payments divided by your gross monthly income. This number is one way lenders measure your ability to manage the monthly payments to repay the money you plan to borrow.
Detailed explanation-3: -The total-debt-to-total-assets ratio is calculated by dividing a company’s total amount of debt by the company’s total amount of assets. If a company has a total-debt-to-total-assets ratio of 0.4, 40% of its assets are financed by creditors, and 60% are financed by owners’ (shareholders’) equity.
Detailed explanation-4: -Debt ratio = Total LiabilitiesTotal Assets. For example, a company with $2 million in total assets and $500, 000 in total liabilities would have a debt ratio of 25%. Total liabilities divided by total assets or the debt/asset ratio shows the proportion of a company’s assets which are financed through debt.
Detailed explanation-5: -Current Ratio-A firm’s total current assets are divided by its total current liabilities. It shows the ability of a firm to meets its current liabilities with current assets.