Debt Management Ratios Paige's Purses,Inc.reported a debt to equity ratio of 2.4 times at the end of 2013.If the firm's total assets at year-end are $27 million,how much of their assets is financed with equity?
A)$7.94m
B)$11.25m
C)$19.06m
D)$64.8m

Question

Quizplus · Accepted Answer

The debt to equity ratio of 2.4 means that for every $1 of equity, there is $2.4 of debt. Let E be the equity. Then, debt = 2.4E. Total assets = debt + equity = 2.4E + E = 3.4E. Given total assets = $27 million, 3.4E = $27 million, so E = $27 million / 3.4 = $7.94 million.