Nicole's Neon Signs, Inc. reported a debt to equity ratio of 1.9 times at the end of 2018. If the firm's total assets at year-end are $100 million, how much of their assets is financed with equity?
A) $34.48m
B) $65.52m
C) $52.63m
D) $100m

Question

Quizplus · Accepted Answer

The debt to equity ratio is calculated as total debt divided by total equity. Given a ratio of 1.9, this means for every $1 of equity, there is $1.9 of debt. If we let E represent equity, then the debt is 1.9E, and the total assets (which is the sum of debt and equity) is E + 1.9E = 2.9E. Given that total assets are $100 million, we have 2.9E = $100 million, solving for E gives E = $100 million / 2.9 = approximately $34.48 million, indicating that $34.48 million of the assets are financed with equity.