Blaine and Lindsay McDonald have total assets of $346,000 and total debt of $168,000. What is their asset-to-debt ratio?

Blaine and Lindsay McDonald have total assets of $346,000 and total debt of $168,000. What is their asset-to-debt ratio?

• A. 1.5
• B. 2.06
• C. 0.68
• D. 3.12

Answer: (B)

To determine the asset-to-debt ratio, you divide the total assets by the total debt. In this case, Blaine and Lindsay McDonald have total assets of $346,000 and total debt of $168,000. The calculation is as follows: Asset-to-Debt Ratio = Total Assets / Total Debt Asset-to-Debt Ratio = $346,000 / $168,000 Asset-to-Debt Ratio = 2.06 This result indicates that for every dollar of debt, they have $2.06 in assets, which reflects a healthy financial position. This higher ratio signifies that they have more assets than liabilities, which generally suggests a lower risk of insolvency and indicates that they are in a more favorable financial situation compared to having a lower ratio. The other options represent incorrect interpretations based on different calculations or misunderstandings about how the asset-to-debt ratio is derived. Simply put, B accurately reflects the proper calculation based on the provided figures.

To determine the asset-to-debt ratio, you divide the total assets by the total debt. In this case, Blaine and Lindsay McDonald have total assets of $346,000 and total debt of $168,000.

The calculation is as follows:

Asset-to-Debt Ratio = Total Assets / Total Debt

Asset-to-Debt Ratio = $346,000 / $168,000

Asset-to-Debt Ratio = 2.06

This result indicates that for every dollar of debt, they have $2.06 in assets, which reflects a healthy financial position. This higher ratio signifies that they have more assets than liabilities, which generally suggests a lower risk of insolvency and indicates that they are in a more favorable financial situation compared to having a lower ratio.

The other options represent incorrect interpretations based on different calculations or misunderstandings about how the asset-to-debt ratio is derived. Simply put, B accurately reflects the proper calculation based on the provided figures.