What is the approximate total debt ratio for a firm with a total debt to equity ratio of .65?
A)35 percent
B)39 percent
C)54 percent
D)65 percent If total debt/equity = .65
Then total liabilities/total assets = .65/1.65

Question

Quizplus · Accepted Answer

The total debt ratio is calculated as total liabilities divided by total assets. Given the debt to equity ratio is 0.65, the total liabilities are 0.65 times the equity. Total assets are the sum of total liabilities and equity, which is 1.65 times the equity. Therefore, the total debt ratio is 0.65/1.65, which is approximately 39 percent.

What Is the Approximate Total Debt Ratio for a Firm