Question

intext:"Jared's Co. has total assets of $60,000 and total liabilities of $40,000. Its debt-to-equity ratio is"

Answer 1

Debt to Equity ratio = 2

Step-by-step explanation:

The debt to equity ratio is a financial ratio to measure the proportion of debt financing in a company's capital structure in relation to the shareholders' equity. The debt to equity ratio can be calculated as follows,

Debt to Equity ratio = Total Liabilities / Total Equity

To calculate the value of total equity, we will use the basic accounting equation which is,

Total assets = Total Liabilities + Total Equity

60000 = 40000 + Total Equity

Total Equity = 60000 - 40000 = $20000

Debt to Equity ratio = 40000 / 20000

Debt to Equity ratio = 2