Question

In a recent year’s financial statements, Home Depot reported the following: Total liabilities = $31,724 million and Total assets = $40,946 million. Compute Home Depot’s debt ratio (assume competitors average a 63.0% debt ratio). (Round your answer to one decimal place.)

Answer 1

Answer:

The debt ratio will be 77.5%

Explanation:

Debt ratio is the ratio which states the percentage of the aggregate asset amount which is to be recorded on the balance sheet, and that is owed to the creditors.

The larger amount of debt ratio, means greater the financial leverage of the company.

The formula to compute the ratio is:

Debt ratio = Total liabilities / Total assets

= $31,724 million / $40,946 million

= 77.5%