Question

Camile Plastics Company had the following total assets, liabilities, and equity as of December 31.

Answer 1

Answer:

B) 30.70%

Explanation:

Given: Assets= $430000.

          Liabilities= $132000.

          Equity= $298000.

Now, computing to find debt ratio.

Formula; Debt ratio= $\frac{Total\ liabilities}{Total\ assets} \times 100$

⇒ Debt ratio= $\frac{132000}{430000} \times 100$

∴ Debt ratio= $30.70\%$

Debt ratio determine the financial risk of the company, as higher is the debt ratio, greater is the financial leverage of the company and it also show the percentage of the assets funded by debt.

Hence, 30.70% is the company's debt ratio as of December 31.