Which of the following calculates the debt-to-owners' equity ratio?
A) Long-term liabilities divided by owners' equity
B) Current liabilities divided by owners' equity
C) Long-term liabilities divided by retained earnings
D) Total liabilities divided by retained earnings
E) Total liabilities divided by owners' equity

Question

Quizplus · Accepted Answer

The debt-to-owners' equity ratio is calculated by dividing the total liabilities of a company by its owners' equity. Option E is the only one that uses the correct formula. Option A calculates the long-term debt-to-owners' equity ratio, while option B calculates the current debt-to-owners' equity ratio. Option C calculates the long-term debt to retained earnings ratio, while option D calculates the total liability to retained earnings ratio.

Which of the Following Calculates the Debt-To-Owners' Equity Ratio