-Kamal Company's debt-to-equity ratio for 2017 is:
A) An indicator that Kamal Company's ability to meet current interest payments to creditors is increasing.
B) Increasing slightly from 2016 to 2017
C) An indicator that for every $1 of capital that stockholders provided, creditors provided nearly $0.52 in 2017
D) An indicator that Kamal Company has relied on stockholders for funds more in 2017 than in 2018

Question

-Kamal Company's debt-to-equity ratio for 2017 is:
A) An indicator that Kamal Company's ability to meet current interest payments to creditors is increasing. 
B) Increasing slightly from 2016 to 2017 
C) An indicator that for every $1 of capital that stockholders provided, creditors provided nearly $0.52 in 2017 
D) An indicator that Kamal Company has relied on stockholders for funds more in 2017 than in 2018

Quizplus · Accepted Answer

The debt to equity ratio is the relationship of total liabilities to total equity at a point in time. For Kamal the ratio is 0.52:1 [Total liabilities ($5,130 + $1,419) / total equity $12,632 = 0.518]. The ratio decreased from 2016 (0.584) to 2017 (0.518). The ratio does not address the ability to meet current interest payments.

-Kamal Company's Debt-To-Equity Ratio for 2017 Is