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THE SOLUTION IS ALREADY GIVEN, MAKE ONLY AN INTERPRETATION FOR THIS PROBLEM 5 sentences

THE SOLUTION IS ALREADY GIVEN, MAKE ONLY AN INTERPRETATION FOR THIS PROBLEM 5 sentences

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Dave's Guitar Shop is thinking about building an additional property onto the back of its existing building for more storage. Dave consults with his banker about applying for a new loan. The bank asks for Dave's balance to examine his overall debt levels. Dave's total assets is P5,000,000 while his total liabilities is P25,000. Compute Dave's debt ratio. Debt Ratio - It is calculated by dividing total debt or total liabilities by total assets. Assets: It is the resources owned by company. Liabilities:- It is the obligation of company that will be settled in future date. Working Note #:- Total Debt = Total Liabilities = P25,000 Total Assets = P5,000,000 Debt Ratio = Total Debt/Total Assets = P25,000/P5,000,000 = 0.005 Final Solution :- Dave's Debt Ratio is 0.005 THE SOLUTION IS ALREADY GIVEN, MAKE ONLY AN INTERPRETATION FOR THIS PROBLEM 5 sentences
Transcribed Image Text:Dave's Guitar Shop is thinking about building an additional property onto the back of its existing building for more storage. Dave consults with his banker about applying for a new loan. The bank asks for Dave's balance to examine his overall debt levels. Dave's total assets is P5,000,000 while his total liabilities is P25,000. Compute Dave's debt ratio. Debt Ratio - It is calculated by dividing total debt or total liabilities by total assets. Assets: It is the resources owned by company. Liabilities:- It is the obligation of company that will be settled in future date. Working Note #:- Total Debt = Total Liabilities = P25,000 Total Assets = P5,000,000 Debt Ratio = Total Debt/Total Assets = P25,000/P5,000,000 = 0.005 Final Solution :- Dave's Debt Ratio is 0.005 THE SOLUTION IS ALREADY GIVEN, MAKE ONLY AN INTERPRETATION FOR THIS PROBLEM 5 sentences
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