Why this is mistaken
Write the debt definition before collecting the numerator. Reconcile the chosen amount to reported liabilities and list every included and excluded category. Use total assets from the same entity, scope, basis, and date. Keep the ratio label tied to that definition throughout the comparison.
Where to watch
When this mistake may appear
- A prompt asks for a debt ratio but supplies several kinds of obligations.
Check your work
Your work may contain this mistake if:
- Copies total liabilities into the numerator or silently excludes obligations without declaring a definition.