Question

Consider this simplified balance sheet for Geomorph Trading: Current assets $ 275 Current liabilities $ 210 Long-term assets 650 Long-term debt 205 Other liabilities 120 Equity 390 $ 925 $ 925 a. What is the company’s debt-equity ratio?

Answer 1

1.37

Step-by-step explanation:

Total Debts (D) = Current liabilities + Long-term debt + Other liabilities

Total Debts (D) = $210 + $205 + $120 = $535

Owner's Equity (E) = $390

The debt-equity ratio (DER) is given by:

`DER = (D)/(E) =(535)/(390)\\DER=1.37`

Geomorph Trading’s debt-equity ratio is 1.37