Data from Karmely Corporation's most recent balance sheet and the company's income statement appear below:
-The debt-to-equity ratio at the end of Year 2 is closest to:
A) 0.28
B) 0.77
C) 0.60
D) 0.37

Question

Data from Karmely Corporation's most recent balance sheet and the company's income statement appear below: 
-The debt-to-equity ratio at the end of Year 2 is closest to:
A) 0.28 
B) 0.77 
C) 0.60 
D) 0.37

Quizplus · Accepted Answer

Debt-to-equity ratio = Total liabilities / Total shareholder's equity

At the end of Year 2, the total liabilities are $1,251,000 and the shareholder's equity is $2,088,000.

Debt-to-equity ratio = $1,251,000 / $2,088,000 = 0.599 or 0.60 (rounded to two decimal places)

Therefore, the closest answer is 0.60, which is answer choice C.

Data from Karmely Corporation's Most Recent Balance Sheet and the Company's