Question

What is the total debt ratio of Levine Inc?
1) 0.53
2) 0.35
3) 0.75
4) 1.20

Answer 1

The total debt ratio of Levine Inc. is calculated by dividing total liabilities by total assets, which yields a ratio of approximately 2.31. None of the provided answer choices are correct based on the given data.

Step-by-step explanation:

The total debt ratio of Levine Inc. is calculated by taking the total liabilities and dividing them by the total assets. The information provided gives us the figures for the company's assets and liabilities. To calculate the total debt ratio, first, we sum up the assets (reserves $30 million, bonds $50 million, loans $50 million) to get $130 million in total assets. Next, we sum up the liabilities (deposits $300 million) and equity ($30 million) to get $330 million. Since equity is a part of the shareholders' claim on the assets and not part of the debt, we exclude it from the liabilities for the purpose of this calculation, leaving us with $300 million in liabilities.

Now, we can calculate the total debt ratio as: liabilities ÷ total assets, which is $300 million ÷ $130 million. This gives us a ratio of 2.3077 or, when rounded, approximately 2.31. Therefore, none of the provided options (1) 0.53, (2) 0.35, (3) 0.75, (4) 1.20 are correct based on the information given.

Answer 2

The total debt ratio of Levine Inc is 2.54.

This correct answer is none of the above.

Step-by-step explanation:

The total debt ratio of Levine Inc can be calculated by dividing the sum of its liabilities (deposits and equity) by the sum of its assets (reserves, bonds, and loans).

In this case, the liabilities are $300 (deposits) plus $30 (equity), which equals $330.

The assets are $30 (reserves) plus $50 (bonds) plus $50 (loans), which equals $130. Dividing $330 by $130 gives us a total debt ratio of 2.54.

This correct answer is none of the above.