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Math  /  Algebra

QuestionAt the beginning of the year, Norwood Pass Industries had $240,000\$ 240,000 in total assets and a debt-to-assets ratio of 0.5 or 50%50 \%. During the year, Norwood's assets increased by $80,000\$ 80,000, and its liabilities increased by $72,000\$ 72,000. What is the debt-to-assets ratio at the end of the year?
Multiple Choice 0.9 or 90%90 \% 0.6 or 60%60 \% 0.4 or 40%40 \% 1.7 or 170%170 \% Prev 19 of 53 Next

Studdy Solution

STEP 1

1. Norwood Pass Industries started the year with 240,000intotalassets.<br/>2.Theinitialdebt−to−assetsratiowas0.5or50240,000 in total assets.<br />2. The initial debt-to-assets ratio was 0.5 or 50%.<br />3. During the year, assets increased by 80,000.
4. During the year, liabilities increased by $72,000.
5. We need to find the debt-to-assets ratio at the end of the year.

STEP 2

1. Calculate initial liabilities using the initial debt-to-assets ratio.
2. Calculate the total assets and liabilities at the end of the year.
3. Calculate the debt-to-assets ratio at the end of the year.
4. Compare the calculated ratio with the given multiple-choice options.

STEP 3

Calculate initial liabilities using the initial debt-to-assets ratio.
Given the debt-to-assets ratio is 0.5, we have:
Initial Liabilities=0.5×Initial Assets=0.5×240,000=120,000 \text{Initial Liabilities} = 0.5 \times \text{Initial Assets} = 0.5 \times 240,000 = 120,000

STEP 4

Calculate the total assets and liabilities at the end of the year.
Total assets at the end of the year:
End Assets=Initial Assets+Increase in Assets=240,000+80,000=320,000 \text{End Assets} = \text{Initial Assets} + \text{Increase in Assets} = 240,000 + 80,000 = 320,000
Total liabilities at the end of the year:
End Liabilities=Initial Liabilities+Increase in Liabilities=120,000+72,000=192,000 \text{End Liabilities} = \text{Initial Liabilities} + \text{Increase in Liabilities} = 120,000 + 72,000 = 192,000

STEP 5

Calculate the debt-to-assets ratio at the end of the year.
Debt-to-Assets Ratio=End LiabilitiesEnd Assets=192,000320,000=0.6 \text{Debt-to-Assets Ratio} = \frac{\text{End Liabilities}}{\text{End Assets}} = \frac{192,000}{320,000} = 0.6

STEP 6

Compare the calculated ratio with the given multiple-choice options.
The calculated debt-to-assets ratio is 0.6 or 60%.
The correct answer is: 0.6 or 60% \boxed{0.6 \text{ or } 60\%}

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