Final answer:
The value of the total assets for a firm with a total debt of $1,470 and a debt-equity ratio of .32 is $6,063.75, calculated using the formula Assets = Liabilities + Equity.
Step-by-step explanation:
To calculate the value of the total assets, we first need to understand the debt-equity ratio, which is a financial leverage indicator that equals total debt divided by total equity. The debt-equity ratio of a firm is given to be .32. This means that for every dollar of equity, there is $0.32 of debt.
To find the total equity, we can rearrange the formula for the debt-equity ratio (Debt/Equity) to solve for equity: Equity = Debt / Debt-Equity Ratio. With the firm’s total debt at $1,470, the total equity would be calculated as follows:
Equity = $1,470 / 0.32
This gives the total equity as $4,593.75.
Now that we have the total equity, we can move forward to find the total assets. The basic accounting equation states that Assets = Liabilities + Equity. The total debt represents the liabilities. Hence, total assets of the firm would be:
Total Assets = Total Debt + Total Equity
Total Assets = $1,470 + $4,593.75
Total Assets = $6,063.75
Therefore, the value of the total assets of the firm equals $6,063.75.