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3 years ago

If the debt/equity ratio is 0.50. what is the debt ratio? 0.5 0.375 0.6 1 0.3333

Business

1 answer:

Novosadov [1.4K]3 years ago

6 0

<u>Calculation of debt ratio:</u>

Debt Ratio can be calculated using the following formula:

Debt Ratio = Total Debt / Total Assets

We are given that debt/equity ratio is 0.50, it means Total Equity = 2 * Total Debt

Total Assets = Total Debt + Total Equity

So, Total Assets = Total Debt + 2* Total Debt

Total Assets = 3* Total Debt

So, Debt Ratio = Total Debt / 3* Total Debt = 1/3 = 0.3333

Hence, Debt ratio is <u>0.3333</u>

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