If the total debt ratio of company X is 0.40, what is the total debt-equity ratio?...

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Question

If the total debt ratio of company X is 0.40, what is the total debt-equity ratio? (Assume no leases.)

Answer 1

Answer #1

Total debt ratio=Total debt/Total assets

Total debt=0.4*Total assets

Total assets=Total liabilities+Total equity

Total equity=Total assets-0.4*Total assets

=0.6*Total assets

Debt-equity ratio=debt/equity

=(0.4*Total assets)/(0.6*Total assets)

=0.67(Approx).

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Answer 2

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