If a company has a liabilities to equity ratio of 0.5,then its assets to equity ratio is

Name: If a company has a liabilities to equity ratio of 0.5,then its assets to equity ratio is
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Question

Quizplus · Accepted Answer

The assets to equity ratio is calculated by dividing the total assets of a company by its equity.

Assets/Equity = 1 / (Liabilities/Equity + 1)

Substituting 0.5 for liabilities to equity ratio:

Assets/Equity = 1 / (0.5 + 1) = 1/1.5 = 0.67

Therefore, the asset to equity ratio is 0.67, which corresponds to choice C.

If a Company Has a Liabilities to Equity Ratio of 0.5,then