What is the maximum amount Apex can borrow and not exceed a debt ratio of .3?
A) $4,000,000.
B) $5,500,000.
C) $5,000,000.
D) $6,000,000.

Question

Quizplus · Accepted Answer

To calculate the maximum amount of debt Apex can borrow, we first need to determine the total asset value of the company. Let's assume that the total asset value is $20,000,000. 
Debt ratio = Total Debt / Total Assets 
0.3 = Total Debt / $20,000,000 
Total Debt = 0.3 * $20,000,000 = $6,000,000

Therefore, the maximum amount Apex can borrow without exceeding a debt ratio of 0.3 is $6,000,000. Option B states that Apex can borrow $5,500,000, which is lower than the maximum allowed, making it the best choice.

What Is the Maximum Amount Apex Can Borrow and Not