A firm has a debt-equity ratio of .40. What is the total debt ratio?
A) .29
B) .33
C) .67
D) 1.40
E) 1.50

Name: A firm has a debt-equity ratio of .40. What is the total debt ratio? A) .29 B) .33 C) .67 D) 1.40 E) 1.50
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Question

Quizplus · Accepted Answer

The debt-equity ratio is 0.40, which means debt is 0.40 times equity. The total debt ratio is calculated as debt divided by total assets (debt + equity). If equity is 1, debt is 0.40, so total assets are 1 + 0.40 = 1.40. The total debt ratio is 0.40 / 1.40 = 0.29.

A Firm Has a Debt-Equity Ratio of