Question

Sarah, Inc. reported assets of $291,562, liabilities of $221,587, and equity of $69,975. What is Sarah's debt ratio?

Answer 1

Sarah, Inc.'s debt ratio, which indicates the proportion of assets financed by liabilities, is calculated as 76% using the assets and liabilities values provided.

Step-by-step explanation:

The debt ratio is a financial metric used to understand the proportion of a company's assets that are financed through liabilities. To calculate Sarah, Inc.'s debt ratio, we use the following formula:

Debt Ratio = Total Liabilities / Total Assets

Given that Sarah, Inc. has total assets of $291,562 and total liabilities of $221,587, we can calculate the debt ratio as follows:

Debt Ratio = $221,587 / $291,562

Debt Ratio = 0.76 or 76%

This means 76% of Sarah, Inc.'s assets are financed by debt.