Question

The following balance sheet information is provided for San Juan Company for 2014: Assets Cash $ 6,650 Accounts receivable 7,950 Inventory 11,550 Prepaid expenses 2,500 Plant and equipment, net of depreciation 18,400 Land 13,000 Total assets $ 60,050 Liabilities and Stockholders' Equity Accounts payable $ 3,150 Salaries payable 7,640 Bonds payable (Due in 2020) 15,400 Common stock, no par 18,600 Retained earnings 15,260 Total liabilities and stockholders' equity $ 60,050 What is the company's debt to equity ratio? (Round your final answer to 2 decimal places.) Multiple Choice 129.29% 45.48% 77.35% 31.87%

Answer 1

Answer: option c

Explanation: Debt equity ratio is ratio of the total amount of debt due on a company to the total amount of equity invested in it . It is generally used to evaluate the solvency of the company. It is computed as follows :-

`=\:(debt)/(equity)`

`=\:(accounts\:payable+salary\:payable\:+bonds\:payable)/(common\:stock\:+retained earnings)`

`=\:(3150\:+\:7640\:+\:15,400)/(18,600\:+15,260)`

= 77.35%