Calculate the value of total equity given the following information: total debt ratio = 0.52; total assets = $25,000.
A) $11,000
B) $11,250
C) $11,500
D) $11,750
E) $12,000

Question

Quizplus · Accepted Answer

The total debt ratio is defined as total debt divided by total assets. If the total debt ratio is 0.52, it means that 52% of the company's assets are financed through debt, leaving 48% (100% - 52%) financed through equity. Therefore, the value of total equity can be calculated as 48% of total assets, which is 0.48 * $25,000 = $12,000.

Calculate the Value of Total Equity Given the Following Information