Find the debt-to-value ratio for a firm with a debt-to-equity ratio of 3.
A)3/4
B)7/9
C)4/5
D)9/11

Question

Quizplus · Accepted Answer

The debt-to-value ratio is calculated as Debt / (Debt + Equity). Given a debt-to-equity ratio of 3, this means Debt = 3 * Equity. Let's denote Debt as D and Equity as E. So, D = 3E. The total value (Debt + Equity) is D + E = 3E + E = 4E. Therefore, the debt-to-value ratio is D / (D + E) = 3E / 4E = 3/4.

Find the Debt-To-Value Ratio for a Firm with a Debt-To-Equity