Question

In business, the formula for debt ratio is Debt Ratio = Total Liabilities/Total Assets. A bakery has total assets of $465 million. Its total liabilities are $130 million. Calculate the debt ratio in simplest form.

Answer 1

We will solve this problem in terms of millions.

The bakery's total assets is 465 million. The total liabilties are 130 million. Plug these values into the debt ratio equation:

$\frac{\text{Total liabilities}}{\text{Total assets}}$

$\frac{130}{465}$

We can simplify this fraction by dividing both the numerator and denominator by 5:

$\frac{130}{465} \div \frac{5}{5} = \boxed{\frac{26}{93}}$

We cannot simplify this fraction any further, as the only common factor between 26 and 93 is 1.

If you want the debt ratio as a percentage, then divide the numerator by the denominator:

$26 \div 93 = 0.2796$

Multiply the decimal by 100 to convert into a percentage:

$0.2796 \times 100 = \boxed{27.96}$

The debt ratio is 26/93, or 27.96%.