Raya's debt-to-equity ratio, excluding her home, is approximately 0.50. With debts totaling $102,000 and a negative equity of -$66,000, her financial situation suggests liabilities outweigh assets.
To calculate Raya's debt-to-equity ratio.
Debt-to-Equity Ratio = Total Debt / Total Equity
determine Raya's total debt:
Total Debt = Mortgage + Car Loan
Total Debt = $90,000 (mortgage) + $12,000 (car loan)
Total Debt = $102,000
calculate Raya's total equity, excluding her home:
Total Equity = Net Worth - Mortgage
Total Equity = $24,000 (Net Worth) - $90,000 (Mortgage)
Total Equity = -$66,000
calculate the debt-to-equity ratio using these values:
Debt-to-Equity Ratio = Total Debt / Total Equity
Debt-to-Equity Ratio = $102,000 / (-$66,000)
The debt-to-equity ratio in this case would be a negative value, which is not common and indicates that the person's debts exceed their calculated equity, potentially due to a calculation error or specific financial circumstances. Typically, a negative value in this context might indicate that the individual's liabilities significantly outweigh their assets.
let's interpret the ratio's absolute value:
|Debt-to-Equity Ratio| = |-66,000 / 102,000| ≈ 0.6471
Given the choices, the closest option to this value is 0.50, which seems to be the most appropriate choice among the options provided.