Kerwin Holdings has total assets of $450,000 and shareholders' equity of $120,000, of which $45,000 of the equity is common stock.How much is the company's debt-to-equity ratio?
A)3.75
B)2.75
C)6.00
D)4.40

Question

Quizplus · Accepted Answer

Total Debt = Total Assets - Shareholders' Equity
Total Debt = $450,000 - $120,000 = $330,000
Debt-to-Equity Ratio = Total Debt / Shareholders' Equity
Debt-to-Equity Ratio = $330,000 / $75,000 (total equity - common stock)
Debt-to-Equity Ratio = 4.4
Therefore, the correct answer is B (2.75).

Kerwin Holdings Has Total Assets of $450,000 and Shareholders' Equity