Question

Debt Management Ratios Tiggie’s Dog Toys, Inc. reported a debt-to-equity ratio of 1.75 times at the end of 2015. If the firm’s total debt at year-end was $25 million, how much equity does Tiggie’s have on its balance sheet?

Answer 1

Equity Tiggie’s has on its balance sheet: $14,285,714 (round up $14,29 million)

Step-by-step explanation:

The debt-to-equity (D/E) ratio compares a company’s total debt to its total equity and can be used to evaluate how much leverage a company is using.

Debt-to-equity ratio is calculated by using formula:

Debt-to-equity ratio = Total debt (or liabilities)/Total equity

From the formula, Total equity = Total debt/Debt-to-equity ratio

In Tiggie’s Dog Toys, Inc., debt-to-equity ratio of 1.75 times and total debt was $25 million at the end of 2015.

Total equity = $25,000,000/1.75 = $14,285,714 (round up $14,29 million)