Debt-to-Total-Assets Ratio of 0.7 means:
A70% of assets financed by debt
B70% of assets financed by equity
CDebt is 30% of assets
DDebt-equity ratio is 0.7
Answer & Solution
Correct answer: A. 70% of assets financed by debt
1. Debt to Total Assets = Total Debt / Total Assets.
2. A value of 0.7 means 70% of the asset base is debt-financed.
3. Higher the ratio, higher the financial leverage.
_Source: ICAI BoS CA Inter Paper 6A, Ch 3 "Financial Analysis and Planning — Ratio Analysis", §3.2.1(d)_