CFA Practice Question

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CFA Practice Question

The total debt ratio is equal to ______.

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
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