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A firm has total assets of Rs.5,00,000 and total liabilities of Rs.2,80,000. What is the debt ratio?

medium MCQ 2 marks Class 12 · Accountancy · Accounting Ratios
  1. 0.44
  2. 0.56
  3. 0.68
  4. 0.78
Answer
0.56

The correct answer is 0.56 — Therefore, the debt ratio is .

Step-by-step solution

  1. Debt ratio formula: Total Liabilities ÷ Total Assets.
  2. Substitute the given values: .
  3. Calculate the division: .
  4. Therefore, the debt ratio is .
Common mistake: Using Liabilities ÷ Equity instead of Liabilities ÷ Assets

Concept tested: Debt ratio (solvency)

Published · How this solution was prepared and checked

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