The Formula for Calculating the Debt Ratio Is

question 36

Multiple Choice

The formula for calculating the debt ratio is

• A)Total liabilities divided by total assets.
• B)Long-term liabilities divided by total assets.
• C)Total liabilities divided by total liabilities and stockholders' equity.
• D)Total debt divided by total stockholders' equity.

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Definitions:

Interest Payments

Money paid by a borrower to a lender for the use of borrowed funds, typically calculated as a percentage of the principal sum.

Rate of Return

The profit or deficit accrued from an investment during a certain timeframe, depicted as a percentage of the investment's original value.

Nominal Rate

The stated interest rate of a loan or financial product, not adjusted for inflation or other factors that affect the real rate of return.

Effective Rate

The actual interest rate earned or paid on an investment, loan, or other financial product, taking into account the effect of compounding.