Question

Sanders Company has total assets of $389 million. Its total liabilities are $102.1 million, and its equity is $286.9 million. Calculate its debt ratio. (Round your answer to 1 decimal place.)

a. 0.3
b. 0.4
c. 0.5
d. 0.6

Answer 1

The debt ratio of Sanders Company is calculated by dividing its total liabilities ($102.1 million) by its total assets ($389 million), resulting in a ratio of approximately 0.262, or 26.2%. After rounding, the debt ratio is 0.3.

Step-by-step explanation:

The debt ratio is a financial ratio that compares a company's total liabilities to its total assets, providing a measure of the proportion of the company's assets that are financed by debt.

To calculate Sanders Company's debt ratio, you would divide its total liabilities by its total assets. Given the information that the company's total assets are $389 million and its total liabilities are $102.1 million,

the calculation would be $102.1 million ÷ $389 million, which equals approximately 0.262, or 26.2%. When rounding to one decimal place, it results in a debt ratio of 0.3.