8) TransSystems Inc. has a total equity of $560,000; sales of $2,250,000; total

Question

8) TransSystems Inc. has a total equity of $560,000; sales of $2,250,000; total assets of $995,000; and current liabilities of $310,000. What is TransSystems Inc.'s debt ratio? A) 55.4% B) 43.7% C) 31.2% D) 66.7%

9) Rural Hydroponics has total equity of $560,000; sales of $2,250,000; current assets of $700,000; and total liabilities of $435,000. What is Rural Hydroponics' total asset turnover? A) 4.02 B) 3.21 C) 2.26 D) 5.51

10) A firm that wants to know if it has enough cash to meet its bills would be most likely to use which kind of ratio? A) liquidity B) leverage C) efficiency D) profitability

Explanation / Answer

Per the rule, I can answer first question only.

Total debt = Total assets – total equity

                      = 995,000 – 560,000

                      =435,000

Debt ratio = Total debt/ total assets

                     = 435,000/ 995,000

                     =43.71%

Option B is correct

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