Question: A company has a debt of $100,000 and equity of $50,000. What is its debt-to-equity ratio?
Options:
2:1
1:2
1:1
3:1
Correct Answer: 2:1
Solution:
Debt-to-Equity Ratio = Total Debt / Total Equity = 100,000 / 50,000 = 2:1.
A company has a debt of $100,000 and equity of $50,000. What is its debt-to-equi
Practice Questions
Q1
A company has a debt of $100,000 and equity of $50,000. What is its debt-to-equity ratio?
2:1
1:2
1:1
3:1
Questions & Step-by-Step Solutions
A company has a debt of $100,000 and equity of $50,000. What is its debt-to-equity ratio?
Step 1: Identify the total debt of the company, which is $100,000.
Step 2: Identify the total equity of the company, which is $50,000.
Step 3: Use the formula for the debt-to-equity ratio, which is Total Debt divided by Total Equity.
Step 4: Plug in the numbers: 100,000 (debt) divided by 50,000 (equity).
Step 5: Calculate the result: 100,000 / 50,000 = 2.
Step 6: Write the ratio in the format of 'X:Y', which is 2:1.
Debt-to-Equity Ratio – A financial ratio that indicates the relative proportion of a company's debt to its equity, used to assess financial leverage.
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