Halibut Limited reported the following items on their balance sheet: $$\begin{array} { l r }
\text { Prepaid Expenses } & \$ 85,000 \
\text { Current liabilities } & 135,000 \
\text { Long-term note payable } & 250,000 \
\text { Bonds payable } & 95,000 \
\text { Share capital } & 125,000 \
\text { Retained earnings } & 157,500
\end{array}$$
The debt to equity ratio for Halibut is closest to:

Question

Halibut Limited reported the following items on their balance sheet: $$\begin{array} { l r } 
\text { Prepaid Expenses } & \$ 85,000 \
\text { Current liabilities } & 135,000 \
\text { Long-term note payable } & 250,000 \
\text { Bonds payable } & 95,000 \
\text { Share capital } & 125,000 \
\text { Retained earnings } & 157,500
\end{array}$$
The debt to equity ratio for Halibut is closest to:

Quizplus · Accepted Answer

The debt to equity ratio is calculated as Total Debt divided by Total Equity. Total Debt = Current liabilities + Long-term note payable + Bonds payable = 135,000 + 250,000 + 95,000 = 480,000. Total Equity = Share capital + Retained earnings = 125,000 + 157,500 = 282,500. Debt to Equity Ratio = 480,000 / 282,500 ≈ 1.7.

Halibut Limited Reported the Following Items on Their Balance Sheet