Question

Tiggie's dog toys, inc., reported a debt-to-equity ratio of 1.75 times at the end of 2012. the firm's total assets at year-end were $25 million. how much of their assets are financed with debt and how much with equity? (do not round intermediate calculations. enter your answer in millions of dollars rounded to 3 decimal places.)

Answer 1

Calculation of amount of Debt and the equity:

It is given that the debt-to-equity ratio is 1.75 times, that means Debt / Equity = 1.75, or we can say Debt = 1.75 * Equity

It is also given that Total assets are $25 Million

We know that:

Debt + Equity = Total Assets

Hence we can say:

1.75 *Equity + Equity = 25 million

Equity *(1.75+1) = 25

Equity  = 25/2.75 = 9.091 Million

And Debt  = 1.75 * Equity = 1.75*25/2.75 = 15.909 Million

Hence their assets are financed with the debt of $15.909 Million and how much with equity of $9.091 Million.