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Book value of fixed assets is $1,093,000 and long-term liabilities are $911,000. What is the ratio of fixed assets to long-term liabilities (to one decimal)?
A2.0
B0.8
C1.2
D1.5
Answer & Solution
Correct answer: C. 1.2
1. Ratio = book value of fixed assets / long-term liabilities.
2. = $1,093,000 / $911,000.
3. = 1.2.
4. Trap: 0.8 (option B) inverts the ratio.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §7.3.4 "Ratio of Fixed Assets to Long-Term Liabilities", p.301_
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