A firm has $100 million in current liabilities, $200 million in long-term debt, $300 million in stockholders' equity, and total book assets of $600 million. There are 100 million shares outstanding with a share price of $16. Calculate the debt ratio for the firm.

Question

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Debt ratio = (Current liabilities + Long-term debt) / Total assets= ($100 million + $200 million) / $600 million= $300 million / $600 million= 0.5 or 50%

A Firm Has $100 Million in Current Liabilities, $200 Million