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Question 8If a company has $30,000 debt and $60,000 equity, what is its debt to equity ratio?

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Question 8If a company has 30,000debtand30,000 debt and 60,000 equity, what is its debt to equity ratio?

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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, 30,000(totaldebt)dividedby30,000 (total debt) divided by 60,000 (total equity) equals 0.5.

Therefore, the debt to equity ratio of the company is 0.5.

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