How Is the Leverage Ratio Calculated

question 1

Multiple Choice

How is the leverage ratio calculated?

• A)Total debt divided by total assets.
• B)Total assets divided by total debt.
• C)Average total assets divided by average common stockholders' equity.
• D)Average total debt divided by average total assets.

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Definitions:

Sales Returns

Transactions where customers return previously purchased merchandise, possibly due to defects or dissatisfaction, impacting the seller's revenue.

Freight-in

The cost of shipping goods to the buyer's location, which is often included in the inventory cost.

Supplies Expense

The cost associated with the consumption of supplies utilized during an accounting period in the operation of a business.

Sales Discounts

A reduction in the price of a product or service provided by the seller to the buyer, often used as an incentive to encourage prompt payment or to increase sales volume.