Question

Orrick Company reported total assets of $4,200,000, total liabilities of $700,000, and total equity of $3, 500,000 at the end of the year and total sales of $15,000,000 during the year. The company's debt-to-equity ratio (stated in a percentage rounded to one decimal point) is______.a. 0.2%.b. 0.5%.c. 2.0%.d. 20.0%.

Answer 1

d. 20.0%.

Step-by-step explanation:

The computation of the debt to equity is shown below:

Debt to equity is

= (total debt ÷ total equity)

where,

Total debt is $700,000

And, the total equity is $3,500,000

Now place these values to the above formula

So, the debt to equity ratio is

= ($700,000 ÷ $3,500,000)

= 20%.

Hence, the debt to equity ratio is 20%

Therefore the correct option is d. 20%