Question

Orrick Company reported total assets of $4,200,000, total liabilities of $700,000, and total equity of $3,500,000 at the end of the year and total sales of $15,000,000 during the year. The company's debt-to-equity ratio (stated in a percentage rounded to one decimal point) is _____.

Answer 1

Answer:

The debt-to-equity ratio of the company is 0.2

Explanation:

The formula to compute the debt to equity ratio is as:

Debt to equity ratio = Debt / Equity

Where

Debt is total liabilities which amounts to $700,000

Equity is total equity which amounts to $3,500,000

Putting the values in the above formula:

= $700,000 / $3,500,000

= 0.2

Debt to equity ratio of the company is 0.2