The debt-to-equity ratio:
A)Is calculated by dividing book value of secured liabilities by book value of pledged assets.
B)Is a means of assessing the risk of a company's financing structure.
C)Is not relevant to secured creditors.
D)Can always be calculated from information provided in a company's income statement.
E)Must be calculated from the market values of assets and liabilities.

Question

Quizplus · Accepted Answer

The debt-to-equity ratio is a measure of a company's financing structure and assesses the risk level. It is calculated by dividing the total debt by the total equity. It is not relevant to secured creditors and cannot always be calculated from the information provided in the income statement. It is generally calculated using book values rather than market values.

The Debt-To-Equity Ratio