Question 8If a company has $30,000 debt and $60,000 equity, what is its debt to equity ratio?
Question
Question 8If a company has 60,000 equity, what is its debt to equity ratio?
Solution
The debt to equity ratio is calculated by dividing total debt by total equity.
Step 1: Identify the total debt. In this case, the total debt is $30,000.
Step 2: Identify the total equity. In this case, the total equity is $60,000.
Step 3: Divide the total debt by the total equity.
So, 60,000 (total equity) equals 0.5.
Therefore, the debt to equity ratio of the company is 0.5.
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