Question

A company has total assets of $150,000, total liabilities of $50,000 and total equity of $100,000. What is this company's debt-to-equity ratio?

Answer 1

The company's debt-to-equity ratio is calculated by dividing its total liabilities of $50,000 by its total equity of $100,000, resulting in a ratio of 0.5.

Step-by-step explanation:

The debt-to-equity ratio is calculated by dividing a company's total liabilities by its shareholder's equity. In this scenario, the company has total liabilities of $50,000 and total equity of $100,000. To find the debt-to-equity ratio, we use the formula:

Debt-to-Equity Ratio = Total Liabilities ÷ Total Equity

Thus, the debt-to-equity ratio for this company would be:

$50,000 (Total Liabilities) ÷ $100,000 (Total Equity) = 0.5

This means the company uses 50 cents of debt for every dollar of equity and has a debt-to-equity ratio of 0.5.