Question

Refer to Exhibit 4.1. What is the firm's total debt to total capital ratio? Do not round your intermediate calculations.
a. 35.35%
b. 53.02%
c. 57.67%
d. 46.51%
e. 36.74%

Answer 1

The question is about the financial leverage ratio which is total debt to total capital.

The correct answer to the given question is D. 46.51%

Explanation

This ratio measures the financial leverage of a company. It assess how much asset of a company are financed by debt.

Formula

The formula to calculate total debt to total capital ratio is :

Total Debt [ Long term + Short Term] / Total Capital

If the total debt of the company is 29,060 and total capital is 62,481,

29,060 / 62,481 = 46.51%

The correct option is d. 46.51%

The exhibit 4.1 is found on quizlet website.

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