A firm has a debt-to-equity ratio of 1.5. If its total equity is $200,000, what

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Question: A firm has a debt-to-equity ratio of 1.5. If its total equity is $200,000, what is its total debt?

Options:

$300,000
$400,000
$500,000
$600,000

Correct Answer: $400,000

Solution:

Debt-to-equity ratio is calculated as total debt divided by total equity. If the ratio is 1.5 and equity is $200,000, then total debt = 1.5 * $200,000 = $300,000.

A firm has a debt-to-equity ratio of 1.5. If its total equity is $200,000, what

Practice Questions

A firm has a debt-to-equity ratio of 1.5. If its total equity is $200,000, what is its total debt?

$300,000
$400,000
$500,000
$600,000

Questions & Step-by-Step Solutions

A firm has a debt-to-equity ratio of 1.5. If its total equity is $200,000, what is its total debt?

Step 1: Understand the debt-to-equity ratio. It tells us how much debt a firm has compared to its equity.
Step 2: The formula for the debt-to-equity ratio is: Debt-to-Equity Ratio = Total Debt / Total Equity.
Step 3: We know the debt-to-equity ratio is 1.5 and the total equity is $200,000.
Step 4: Plug the values into the formula: 1.5 = Total Debt / $200,000.
Step 5: To find Total Debt, multiply both sides of the equation by $200,000: Total Debt = 1.5 * $200,000.
Step 6: Calculate the total debt: Total Debt = $300,000.

Debt-to-Equity Ratio – A financial metric that compares a company's total debt to its total equity, indicating the proportion of debt used to finance the company's assets.
Total Debt Calculation – The process of determining total debt using the debt-to-equity ratio and total equity values.

A firm has a debt-to-equity ratio of 1.5. If its total equity is $200,000, what

What’s inside this PDF?

A firm has a debt-to-equity ratio of 1.5. If its total equity is $200,000, what

Practice Questions

Questions & Step-by-Step Solutions

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