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18 September, 08:19

Tiggie's Dog Toys, Inc. reported a debt-to-equity ratio of 2.00 times at the end of 2018. The firm's total assets at year-end were $22.50 million. How much of their assets are financed with debt and how much with equity

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  1. 18 September, 09:32
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    The amount of asset financed with debt is $15 million and amount of assets financed by equity is $7.5 million

    Explanation:

    Debt/Equity=2 equation 1

    Debt=2*equity

    debt+equity=22.50 equation 2

    Since debt is 2equity, substitute for debt in equation 2

    2equity+equity=22.50

    3equity=22.50

    equity=22.50/3

    equity = $7.5 million

    since debt=2equity

    debt=2*$7.5 million

    debt=$15 million

    The company could be said to be highly geared as debt financing is double of equity financing, in essence it is likely going to have volatile earnings as high amount interest is payable year-on-year
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Home » Business » Tiggie's Dog Toys, Inc. reported a debt-to-equity ratio of 2.00 times at the end of 2018. The firm's total assets at year-end were $22.50 million. How much of their assets are financed with debt and how much with equity
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