If a firm has a debt-equity ratio of 1.0,then its total debt ratio must be which one of the following?
A)0.0
B)0.5
C)1.0
D)1.5
E)2.0

Question

Quizplus · Accepted Answer

A debt-equity ratio of 1.0 means that the firm's total debt is equal to its total equity. The total debt ratio is calculated as total debt divided by total debt plus total equity. If debt equals equity, then the total debt ratio is 0.5 (or 50%), because the debt represents half of the financing.

If a Firm Has a Debt-Equity Ratio of 1