Question

At the beginning of the current year, trenton company inc.'s total assets were $248,000 and its total liabilities were $175,000. during the year, the company reported total revenues of $93,000, total expenses of $76,000 and dividends of $5,000. there were no other changes in stockholders' equity during the year and total assets at the end of the year were $260,000. trenton company's debt ratio at the end of the current year is:

Answer 1

The debt ratio is calculated by dividing the Total Liabilities by Total Assets. We are asked to calculate the debt ratio at the end of the year, hence we need to take year-end values for Total Liabilities and Total Assets.

We are given the Total Liabilities at the beginning of the year $175,000 and there is no change in the liabilities given, hence we can say that Total liabilities at the end of the year shall remain same = $175,000

We are given Total Assets at the end of the year are $260,000

Debt ratio = Total Liabilities / Total Assets = 175000/260000 = 0.673

Hence debt ratio at the end of the current year shall be 0.673