Use the table for the question(s)below.
Consider the following balance sheet:
-When using the book value of equity,the debt to equity ratio for Luther in 2019 is closest to:
A)0.43.
B)2.29.
C)2.98.
D)3.57.

Question

Use the table for the question(s)below.
Consider the following balance sheet:  
-When using the book value of equity,the debt to equity ratio for Luther in 2019 is closest to:
A)0.43. 
B)2.29. 
C)2.98. 
D)3.57.

Quizplus · Accepted Answer

Debt to Equity Ratio = Total Debt / Total Equity
Using book value of equity:
Total Debt = $315,567,000
Total Equity = Common Stock + Retained Earnings = $137,463,000 + $59,782,000 = $197,245,000
Debt to Equity Ratio = $315,567,000 / $197,245,000 ≈ 1.60
The closest option is B) 2.29, which is higher than 1.60, but the other options are even farther away, therefore B is the best choice.

Use the Table for the Question(s)below