Question

A firm has total assets of $638,727, current assets of $203,015, current liabilities of $122,008, and total debt of $348,092. What is the debt-equity?A. .87 B. 1.43 C. 1.31 D. 1.03 E. 1.20

Answer 1

Answer:

E. 1.20

Explanation:

The formula and the computation of the debt-equity ratio is shown below:

Debt equity ratio = (Total debt ÷ Shareholders’ Equity)

where,  

Total debt = $348,092

And, the shareholder equity would be

= Total assets - total debt

= $638,727 - $348,092

= $290,635

So, the debt - equity ratio would be

= $348,092 ÷ $290,635

= 1.20