What Is the Debt/net Worth Ratio and the Debt to Total

question 12

Essay

What is the debt/net worth ratio and the debt to total assets ratio for a firm with total debt of $600,000 and equity of $400,000?

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Definitions:

Normal Balance

The side of an account where increases are recorded, which is the debit side for assets and expenses, and the credit side for liabilities, equity, and revenue.

Rent Expense

An expense account that records the cost incurred by a business to utilize property or equipment for operations.

Debit

An accounting entry that increases an asset or expense account, or decreases a liability or equity account, reflected on the left side of an account.

Credit

An accounting entry that either increases a liability or equity account, or decreases an asset or expense account. It is also used to refer to the provision of resources by a credit provider to a borrower.