Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

1. Introduction to Accounting

Fundamental Accounting Equation

Financial Accounting

1. Introduction to Accounting

Fundamental Accounting Equation

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Multiple Choice

Which of the following correctly represents the formula for the total debt ratio?

Total Debt Ratio = \frac{Total Liabilities}{Total Assets}

Total Debt Ratio = \frac{Total Equity}{Total Assets}

Total Debt Ratio = \frac{Total Assets - Total Equity}{Total Assets}

Total Debt Ratio = \frac{Total Assets}{Total Liabilities}

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Verified step by step guidance

Step 1: Understand the concept of the Total Debt Ratio. It is a financial metric used to measure the proportion of a company's assets that are financed through liabilities. This helps assess the company's financial leverage and risk.

Step 2: Recall the formula for the Total Debt Ratio. The correct formula is Total Debt Ratio = \( \frac{\text{Total Liabilities}}{\text{Total Assets}} \). This formula indicates the percentage of assets funded by liabilities.

Step 3: Analyze the options provided in the problem. Compare each formula to the correct formula for the Total Debt Ratio. For example, \( \frac{\text{Total Equity}}{\text{Total Assets}} \) represents the equity ratio, not the debt ratio.

Step 4: Evaluate the formula \( \frac{\text{Total Assets} - \text{Total Equity}}{\text{Total Assets}} \). This is mathematically equivalent to \( \frac{\text{Total Liabilities}}{\text{Total Assets}} \), as Total Assets - Total Equity equals Total Liabilities.

Step 5: Confirm that the correct representation of the Total Debt Ratio is \( \frac{\text{Total Liabilities}}{\text{Total Assets}} \), and recognize that \( \frac{\text{Total Assets}}{\text{Total Liabilities}} \) is incorrect as it represents the inverse relationship.