Illusions, Inc. has current assets of $52,000, long-term assets of $262,700, current liabilities of $42,600, and long-term debt of $154,700. Illusions' debt ratio is: (Round your final answer to two decimal places, X.XX%.)
A)75.1%.
B)49.16%.
C)62.69%.
D)58.89%.

Question

Quizplus · Accepted Answer

The formula for debt ratio is:

Debt Ratio = Total Debt / Total Assets

Total assets can be calculated by adding current assets and long-term assets:

Total Assets = Current Assets + Long-term Assets = $52,000 + $262,700 = $314,700

Total debt can be calculated by adding current liabilities and long-term debt:

Total Debt = Current Liabilities + Long-term Debt = $42,600 + $154,700 = $197,300

Plugging these values into the debt ratio formula:

Debt Ratio = Total Debt / Total Assets = $197,300 / $314,700 = 0.6269

Converting to a percentage and rounding to two decimal places:

Debt Ratio = 62.69%

Therefore, the best choice is C.