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1 November, 12:03

If the debt/equity ratio is 0.50. what is the debt ratio? 0.5 0.375 0.6 1 0.3333

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  1. 1 November, 15:01
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    Calculation of debt ratio:

    Debt Ratio can be calculated using the following formula:

    Debt Ratio = Total Debt / Total Assets

    We are given that debt/equity ratio is 0.50, it means Total Equity = 2 * Total Debt

    Total Assets = Total Debt + Total Equity

    So, Total Assets = Total Debt + 2 * Total Debt

    Or

    Total Assets = 3 * Total Debt

    So, Debt Ratio = Total Debt / 3 * Total Debt = 1/3 = 0.3333

    Hence, Debt ratio is 0.3333
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