Nicole's Neon Signs, Inc. reported a debt to equity ratio of 1.9 times at the end of 2013. If the firm's total assets at year-end are $100 million, how much of their assets is financed with equity?

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Quizplus · Accepted Answer

The debt to equity ratio of 1.9 means that for every $1 of equity, there is $1.9 of debt. Therefore, the equity portion is 1/(1+1.9) of the total assets. So, equity = $100 million * (1/2.9) = $34.48 million.