Tierre's Ts, Inc. reported a debt to equity ratio of 3 times at the end of 2018. If the firm's total assets at year-end are $15 million, how much of their assets is financed with equity?
A) $3.75m
B) $5m
C) $11.25m
D) $45m

Question

Quizplus · Accepted Answer

The debt to equity ratio is 3, meaning for every $1 of equity, there is $3 of debt. Therefore, the firm's assets are financed with 1 part equity for every 3 parts debt, making a total of 4 parts. Since the total assets are $15 million, each part is $15 million / 4 = $3.75 million, which represents the equity financing.