Question

1. assets for lincoln company totaled $13,000, liabilities totaled $1,000, and stockholders' equity totaled $12,000. what is the ratio of liabilities to stockholders' equity?

Answer 1

The ratio of liabilities to stockholders' equity is 0.083.

What is the ratio of liabilities to stockholders' equity?

Liabilities are future benefits that would have to be sacrificed in the future by an entity to other entities as a result of past transactions. An example of liability is account payable.

Stockholder's equity is the difference between assets and liabilities. Assets are resources that can be used to increase the value of the firm.  An example of an asset is account receivable.

The ratio of liabilities to stockholders' equity can be determined by dividing liabilities by stockholders equity.

The ratio of liabilities to stockholders' equity = liabilities / stockholders' equity

1000 / 12,000 = 0.083

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