Question

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.)

Answer 1

Debt ratio = 0.77 (to 2 decimal places)

Step-by-step 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.