The Debt to Assets Ratio Is Computed by Dividing

question 27

Multiple Choice

The debt to assets ratio is computed by dividing

• A) current liabilities by total assets.
• B) long-term liabilities by total assets.
• C) total liabilities by total assets.
• D) total assets by total liabilities.

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Definitions:

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or within the business's normal operating cycle if longer.

Current Liabilities

Financial obligations of a business that are due and payable within one year, including accounts payable, short-term loans, and other short-term debts.

Common-size Percent

A financial analysis tool that converts income statement items into percentage of revenue, facilitating trend analysis and comparison.

Total Assets

The sum of all resources owned by a company, including cash, inventory, property, and equipment, reported on the balance sheet.