Total assets 550000 total debt 380000 1 What is the total

Total assets = $550,000, total debt = $380,000. 1) What is the total debt ratio? 2) What is the debt-equity ratio? 3) What is the equity multiplier?

Solution

1)Total Debt ratio = Total debt/ Total assets = 380,000/550,000 = 0.691
2)Equity = Total assets - Total Debt = 550000 - 380000 = 170000
Debt Equity Ratio = 380,000/170,000 = 2.235
3)Equity Multiplier = Total Assets/ Total Equity = 550,000/170,000 = 3.235

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