- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 11. Financial Analysis Techniques
- Subject 4. Solvency Ratios
CFA Practice Question
The total debt ratio is equal to ______.
B. total liabilities divided by stockholders' equity
C. total liabilities divided by total assets
A. long-term debt divided by total capitalization
B. total liabilities divided by stockholders' equity
C. total liabilities divided by total assets
Correct Answer: C
The total debt ratio is equal to total liabilities divided by total assets. It shows the percentage of all assets financed with debt.
User Contributed Comments 9
| User | Comment |
|---|---|
| kalps | Debt ratio = Total liabilities / Total Assets - shows percentage of all assets financed with debt |
| whoi | debt ratio = total debt ratio ..... |
| DonAnd | Total Debt Ratio = Total Debt / Total Assets |
| aniketcpp | In another word, Toral debt ratio=1/Current ratio |
| johntan1979 | That is wrong aniketcpp Current ratio measures only current liabilities (debt) and current assets. |
| Shaan23 | How is this right? Total debt ratio = Total D / Total A That would mean total d and total Liabilities is the same thing.... |
| leon121 | i don't believe this. total debt is long-term debt plus notes payable and other types of debt. current liabilities should not be included. but ok. |
| ascruggs92 | Unless we are supposed to consider all liabilities debt (which technically they are but from an B/S perspective they aren't) this answer is wrong. It even says in the notes Total Debt over Total Assets, so I don't know what this crap is. |
| dada | The answer is correct, @ascruggs92. The debt ratio is defined as the ratio of total - long-term and short-term - debt to total assets, expressed as a decimal or percentage. From investopedia |