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3 years ago

Allen, inc., has a total debt ratio of .34. what is its debt-equity ratio

1 answer:

6 0

Total debt ratio is the ratio of total debt to total assets
i.e
Total debt ratio = Total debt / Total assets
But Total assets is nothing but total equity plus total debt
Now let us consider,
TD = Total debt
TE = Total equity
TA= Total assets
Therefore,
Total debt ratio = TD/TA
But as mentioned above
TA = TD + TE
total debt ratio = Total debt/(total debt+total equity)
total debt ratio = .34(given)
.34 = TD / (TD + TE)
Solving this equation yields:
0.34 = 1/(1+ TE/TD)
0.34(1+TE/TD) = 1
0.34 + 0.34TE/TD =1
.34(TE/TD) = 1 - 0.34
0.34 (TE/TD) = 0.66
0.34TE = 0.66TD
Now, Debt equity ratio is the ratio of Total debt to total equity
Debt-equity ratio = TD / TE
Debt-equity ratio = 0.34 / 0.66
Debt-equity ratio = 0.51515152

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3 years ago

Ivanhoe Diesel owns the Fredonia Barber Shop. He employs 5 barbers and pays each a base rate of $1,380 per month. One of the bar

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Answer:

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a. Variable costs per haircut = $4.40

Total monthly fixed costs = $8,910

b. Break-even point in units = 1,350

Break-even point in sales dollars = $14,850

Net income with 1,670 haircuts = $2,120

Explanation:

a) Data and Calculations:

Fixed costs:

Wages of barbers per month = $6,900 ($1,380 * 5)

Manager's allowance per month = $535

Advertising per month = $270

Rent per month = $1,010

Utilities per month = $160

Magazines per month = $35

Total fixed costs per month = $8,910

Ivanhoe currently charges $11 per haircut.

Variable costs per haircut:

Commission per haircut = $3.75

Barber supplies per haircut = $0.50

Utilities per haircut = $0.15

Total variable costs per unit $4.40

Contribution margin per haircut = $6.60 ($11 - $4.40)

Contribution margin ratio = 0.6

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Break-even point in sales dollars = $8,910/0.6 = $14,850

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Contribution $11,030

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Net income $2,120

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3 years ago