Trina'sTrikes, Inc. reported a debt-to-equity ratio of 2 times at the end of 2018. If the firm's total debt at year-end was $10 million, how much equity does Trina's Trikes have?
A) $2 million
B) $5 million
C) $10 million
D) $20 million

Question

Quizplus · Accepted Answer

The debt-to-equity ratio is calculated as total debt divided by total equity. Given a debt-to-equity ratio of 2, this means total debt is twice the equity. Therefore, if total debt is $10 million, the equity must be $5 million to maintain a ratio of 2 ($10 million / $5 million = 2).