Question

Total Long-term liabilities = 2,434,664    Total Assets = 2,255,213 Long Term Debt to Total Assets =...

Total Long-term liabilities = 2,434,664    Total Assets = 2,255,213

Long Term Debt to Total Assets = Long-term Debt / Total Assets = 2434664 / 255213 ≈ 1.0796%

1. What range is generally considered good or acceptable for this measure?

2. Suppose this measure had been 6.3% significantly lower instead. How would this have changed your interpretation of the financial condition of the city?

Homework Answers

Answer #1

1. A range of 0.4 to 40% is generally considered to be good or acceptable for long term debt to total assets ratio

2. if the measure is lower by 6.3% still the long term debt is still ( 1.0796 * ( 1 -0.063) ) 1.0116 of the total assets. the long term debts are higher than the assets . Hence at any point of time it is not possible to payoff the 100% of the debt with teh total assets available in the co. This increases the risk of bankruptcy and closing of business.

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