Question #51114

Tamparuli Inc. has a total equity of RM560,000; sales of RM2,250,000; total assets of RM995,000; and current liabilities of RM310,000. What is Tamparuli Inc.'s debt ratio?

Expert's answer

First of all, it is necessary to note that the debt ratio can be defined as the ratio of total debt to total assets, expressed in percentage, and can be interpreted as the proportion of a company’s assets that are financed by debt.

We can write an equation:

Assets = Liabilities + Equity

From this equation we can find Liabilities Liabilities = RM995,000 - RM560,000 = RM 435,000 So, the debt ratio is:

debt ratio = RM 435,000 / RM995,000 *100% = 47.3%

We can write an equation:

Assets = Liabilities + Equity

From this equation we can find Liabilities Liabilities = RM995,000 - RM560,000 = RM 435,000 So, the debt ratio is:

debt ratio = RM 435,000 / RM995,000 *100% = 47.3%

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