Debt Management Ratios Will's Wheels, Inc. reported a debt-to-equity ratio of .65 times at the end of 2011. If the firm's total debt at year-end was $5 million, how much equity does Will's Wheels have?

Question

Quizplus · Accepted Answer

The debt-to-equity ratio is calculated as total debt divided by total equity. Given the debt-to-equity ratio of 0.65 and total debt of $5 million, we can set up the equation: $5 million / Equity = 0.65. Solving for Equity gives us Equity = $5 million / 0.65 = $7.69 million.