Which statement is true about the equation fraction 3 over 4z − fraction 1 over 4z + 1 = fraction 2 over 4z + 1?
2 answers:
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The required debt-equity ratio is 14:15
<u>Solution:</u>
<em>Given:</em>
Liabilities of the company = $14000
Equity of the company = $15000
<em>To calculate: </em>The debt-equity ratio
Here, the liabilities are included in the debt of the company. The debt-to-equity (D/E) ratio is calculated by dividing a company's total liabilities by its shareholder equity. Therefore, the debt equity ratio is as follows,
The debt-equity ratio reflects the ability of shareholder equity to cover all outstanding debts in the event of a business downturn.