Answer:
Total debt is $15.91million
Total equity is 9.09miliion
Explanation:
Debt-to-equity ratio relates to how a firm is financing its operations through debt versus shareholders' equity(owners' fund)
The formula is: Total debt/total equity
Debt-to-equity ratio = 1.75times
Total assets =$25 million
We know the Equity = Asset - liability(debt)
We can rewrite the equation as:
Debt-to-equity ratio = Total debt/asset - debt
Let's represent debt as 'y'
1.75 = y/$25million - y
y = 1.75($25million - y)
y = $43.75 - 1.75y
Collect the like terms
y + 1.75y = $43.75million
2.75y = $43.75million
y = $43.75million/2.75
y = $15.91million
Therefore, total debt is $15.91million
Using the same formula: Total debt/total equity
Lets represent equity with z
1.75 = $15.91million/z
z = 15.91million/1.75
z = 9.09miliion
Therefore total equity is 9.09miliion
