Question

A firm has total assets of $958,090, current assets of $304,522, current liabilities of $183,012, and total debt of $382,901. What is the debt-equity ratio?

a) 0.67
b) 1.03
c)1.31
d) 1.43
e) 1.20

Answer 1

The debt-equity ratio is approximately 0.49.

Step-by-step explanation:

To calculate the debt-equity ratio, you need to divide the total debt by the total equity. The total equity can be calculated by subtracting the current liabilities from the total assets. In this case, the total debt is $382,901 and the total equity is $958,090 - $183,012 = $775,078. Now, divide the total debt by the total equity: $382,901 / $775,078 ≈ 0.4949. Therefore, the debt-equity ratio is approximately 0.49.