Question

-g LotsofDebt, Inc. and Lots of Equity, Inc., both of which operate in the same industry. LotsofDebt, Inc. finances its $34.75 million in assets with $31.25 million in debt and $3.50 million in equity. Lots of Equity, Inc. finances its $34.75 million in assets with $3.50 million in debt and $31.25 million in equity. Calculate the debt ratio,-g You are considering a stock investment in one of two firms (LotsofDebt, Inc. and Lots of Equity, Inc.), both of which operate in the same industry. LotsofDebt, Inc. finances its $34.75 million in assets with $31.25 million in debt and $3.50 million in equity. Lots of Equity, Inc. finances its $34.75 million in assets with $3.50 million in debt and $31.25 million in equity. Calculate the debt ratio

Answer 1

Lots of debt = 89.93%

Lots of equity = 10.07%

Step-by-step explanation:

The calculation of debt ratio of Lots of debt and Lots of equity is given below:-

Debt Ratio = Debt ÷ Total assets

Lots of debt = Debt ÷ Total Assets

= $31.25 million ÷ $34.75 million

= 89.93%

Lots of equity = Equity ÷ Assets

= $3.50 million ÷ $34.75 million

=10.07%

Therefore for computing the debt ratio of Lots of debt and Lots of equity we simply applied the above formula.