Question

11. The year end balance sheet of Ultimate Medical Center show total liabilities of $5,000,000, which includes a loan to expand services. Net worth at the balance sheet date was $ 4,000,000. Calculate the debt-to-worth ratio.

Answer 1

Given is:

The total liabilities are $5,000,000 including a loan to expand services.

Net worth at the balance sheet date is given $ 4,000,000.

Hence out of $5,000,000 , $ 4,000,000 is capital and remaining $1,000,000 is loan

Debts to net worth ratio is = $\frac{1000000}{4000000}*100$

= 0.25 or 25%