Question

In the formula for the debt ratio (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 the simplest form.

a) 28:93
b) 7:23
c) 13:45
d) 8:27

Answer 1

The debt ratio of the bakery is 28:93.

Step-by-step explanation:

The debt ratio calculates the proportion of a company's total liabilities to its total assets. To calculate the debt ratio in this scenario, divide the total liabilities ($130 million) by the total assets ($465 million). The calculation would be:

Debt Ratio = Total Liabilities / Total Assets

Debt Ratio = $130 million / $465 million

Debt Ratio = 0.28

So, the debt ratio in the simplest form is 28:93 (option a).