Pointer Health Corporation has a total asset turnover of 2.66, total liabilities of $1 004 162 and sales revenues of $7 025 000.What is Pointer's debt ratio?
A)38.0%
B)14.3 %
C)26.7%
D)81.1%

Question

Quizplus · Accepted Answer

38.0%The debt ratio is calculated as total liabilities divided by total assets. First, we need to find the total assets. Given the total asset turnover ratio (sales divided by total assets), we can rearrange the formula to find total assets: total assets = sales / total asset turnover = $7,025,000 / 2.66 ≈ $2,641,353. Then, the debt ratio = (total liabilities / total assets) * 100 = ($1,004,162 / $2,641,353) * 100 ≈ 38.0%.

Pointer Health Corporation Has a Total Asset Turnover of 2