Jarman Company had current and noncurrent liabilities of $50,000 and $160,000, respectively. The company’s current assets were $76,000, out of a total asset figure of $457,000. Calculate the company’s debt ratio. (
Question
Jarman Company had current and noncurrent liabilities of 160,000, respectively. The company’s current assets were 457,000. Calculate the company’s debt ratio. (
Solution
To calculate the company's debt ratio, we need to determine the total liabilities and total assets.
Step 1: Add the current liabilities and noncurrent liabilities together: 160,000 = $210,000
Step 2: Calculate the debt ratio by dividing the total liabilities by the total assets: Debt Ratio = Total Liabilities / Total Assets
Total Assets = 210,000
Debt Ratio = 457,000
Step 3: Simplify the ratio: Debt Ratio = 0.459 or 45.9%
Therefore, the company's debt ratio is 45.9%.
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