Debt Management Ratios Zoe's Dog Toys, Inc. reported a debt to equity ratio of .5 times at the end of 2011. If the firm's total assets at year-end are $50 million, how much of their assets is financed with equity?

Question

Quizplus · Accepted Answer

Debt to equity ratio = Total debt / Total equity
0.5 = Total debt / Total equity
Total equity = Total assets - Total debt
Total equity = $50 million - (0.5 x Total equity)
0.5 x Total equity = $25 million
Total equity = $25 million / 0.5
Total equity = $50 million
Therefore, $33.33 million of the assets are financed with equity. Option C is correct.