Aston Corporation has a .7 to 1 ratio of stockholders' equity to total equities. If stockholders' equity is $420,000, then its total liabilities are $180,000.

Question

Quizplus · Accepted Answer

To find total equities, we can use the formula:
Total Equities = Stockholders' Equity + Total Liabilities
We are given that the ratio of stockholders' equity to total equities is 0.7 to 1. This can also be represented as:
Stockholders' Equity = 0.7 * Total Equities
We can substitute this in the above formula to get:
Total Equities = Stockholders' Equity / 0.7
Total Equities = $420,000 / 0.7
Total Equities = $600,000
Now, we can use the first formula to find the total liabilities:
Total Equities = Stockholders' Equity + Total Liabilities
$600,000 = $420,000 + Total Liabilities
Total Liabilities = $180,000
Therefore, the given statement is true.

Aston Corporation Has a