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5 December, 16:11

Rosewood Company had current assets of $ 562 , current liabilities of $ 403 , total assets of $ 772 , and longminusterm liabilities of $ 190. What is Rosewood's debt ratio? (Round your final answer to two decimal places.)

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  1. 5 December, 16:30
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    Debt ratio = 0.77 (to 2 decimal places)

    Explanation:

    The debt ratio of a company is the ratio of the total debt owed to the total assets owned by the company. It is represented mathematically as:

    Debt Ratio = Total Debt : Total asset

    Total Debt = current liabilities + longminusterm liabilities

    Total Debt = 403 + 190 = $593

    Total assets = $772

    ∴ Debt ratio = 593 : 772 = 0.77 (to 2 decimal places)

    note that current assets are not used in the calculation because it is a subset of total asset.
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