GK
ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The ideal ratio between total long term funds and total long terms loan is ____
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1 : 1
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2:1
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3 :1
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4:1
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Explanation:
Detailed explanation-1: -Long-term debt is defined as any interest-bearing obligation that was recorded on the balance sheet 12 months or later. The long-term debt to total capitalization ratio is calculated by dividing long-term debt by the total available capital (sum of long-term debt plus shareholder’s equity).
Detailed explanation-2: -Example of Long-Term Debt to Assets Ratio If a company has $100, 000 in total assets with $40, 000 in long-term debt, its long-term debt-to-total-assets ratio is $40, 000/$100, 000 = 0.4, or 40%. This ratio indicates that the company has 40 cents of long-term debt for each dollar it has in assets.
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