Question
Analysis Component: Analysis Compresses assets are financed 76% by debt. What does this mean? As part of your answer, include an explanation of how the 76% was calculated.(Round your answer to the nearest whole number.) square square square
Solution
4.1
(186 Votes)
Ella
Veteran ยท Tutor for 11 years
Answer
This means that 76% of Analysis Compresses' assets are purchased using borrowed money (debt financing) rather than equity financing (funds from owners/investors). A high percentage of debt financing can indicate higher financial risk for a company.Here's how the 76% is likely calculated:**Formula:** (Total Debt / Total Assets) * 100**Example:** Let's say Analysis Compresses has
76 million in total debt.(
100 million) * 100 = 76%Therefore, 76% of the company's assets are financed by debt. The remaining 24% would be financed by equity.