A debt to equity ratio of 1.75 means there is: (a) $1.75 of debt for each $1.00 of equity (b) $0.75 of debt for each $1.00 of equity (c) $1.75 of equity for each $1.00 of debt (d) $0.75 of equity for each $1.00 of debt

A debt to equity ratio of 1.75 means there is: (a) $1.75 of debt for each $1.00 of equity (b) $0.75 of debt for each $1.00 of equity (c) $1.75 of equity for each $1.00 of debt (d) $0.75 of equity for each $1.00 of debt | Homework.Study.com (2024)

Question:

A debt to equity ratio of 1.75 means there is:

(a) $1.75 of debt for each $1.00 of equity

Debt to Equity Ratio:

In analyzing and understanding the performance of a business, one of the tools we use is the ratio analysis. We have different financial ratios which are categorized into; liquidity, solvency, profitability, and market value ratios. The debt to equity ratio is a solvency ratio that indicates how a firm is financing its assets by comparing the debt and equity applied.

Answer and Explanation:1

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(a) $1.75 of debt for each $1.00 of equity

The formula for the debt-equity ratio is;

{eq}Debt \ to \ Equity \ ratio =\dfrac{Total \...

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