Debt Management Ratios Nicole's Neon Signs, Inc. reported a debt to equity ratio of 1.9 times at the end of 2011. If the firm's total assets at year-end are $100 million, how much of their assets is financed with equity?

Question

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The debt to equity ratio of 1.9 means that for every $1 of equity, there is $1.9 of debt. Let E be the equity. Then, 1.9E is the debt. The total assets are financed by both debt and equity, so E + 1.9E = $100 million. Solving for E gives E = $34.48 million.