Will's Wheels, Inc. reported a debt-to-equity ratio of 0.65 times at the end of 2018. If the firm's total debt at year-end was $5 million, how much equity does Will's Wheels have?
A) $0.65 million
B) $3.25 million
C) $5 million
D) $7.69 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 0.65 and total debt of $5 million, we can set up the equation 0.65 = $5 million / Equity. Solving for equity gives us Equity = $5 million / 0.65 = $7.69 million.