Identify the correct formula below used to calculate the debt ratio.
A)Total Equity/Total Liabilities.
B)Total Liabilities/Total Equity.
C)Total Liabilities/Total Assets.
D)Total Assets/Total Liabilities.
E)Total Equity/Total Assets.

Question

Quizplus · Accepted Answer

The debt ratio is calculated by dividing total liabilities by total assets. This provides an indication of how much of a company's assets are financed through debt. Option A and E are incorrect because they calculate equity ratio. Option B and D are incorrect because they calculate the reciprocal ratio.

Identify the Correct Formula Below Used to Calculate the Debt