A measurement of what percent of the total assets is owed to creditors is which ratio?

A measurement of what percent of the total assets is owed to creditors is which ratio?

• A. Debt to Asset Ratio
• B. Equity to Asset Ratio
• C. Current Ratio
• D. Asset Turnover

Answer: (A)

This measures how much of the business’s assets are financed with borrowed funds. The debt-to-asset ratio is calculated as total liabilities divided by total assets and is usually shown as a percentage. It shows the portion of assets that creditors have a claim to, so a higher percentage means greater leverage and more financial risk. For example, if total assets are 1,000,000 and total liabilities are 400,000, the debt-to-asset ratio is 40%. That 40% represents the part of assets financed by debt. The other options don’t fit this specific question: equity to asset ratio looks at owners’ equity relative to assets, current ratio compares short-term liquidity (current assets to current liabilities), and asset turnover measures how efficiently assets generate sales, not how much is owed to creditors.

This measures how much of the business’s assets are financed with borrowed funds. The debt-to-asset ratio is calculated as total liabilities divided by total assets and is usually shown as a percentage. It shows the portion of assets that creditors have a claim to, so a higher percentage means greater leverage and more financial risk.

For example, if total assets are 1,000,000 and total liabilities are 400,000, the debt-to-asset ratio is 40%. That 40% represents the part of assets financed by debt.

The other options don’t fit this specific question: equity to asset ratio looks at owners’ equity relative to assets, current ratio compares short-term liquidity (current assets to current liabilities), and asset turnover measures how efficiently assets generate sales, not how much is owed to creditors.