   Chapter 9, Problem 40CE ### Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

#### Solutions ### Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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# Cornerstone Exercise Ratio AnalysisBlue Corporation has $2,000,000 in total liabilities and$3,500,000 in total assets.Required:Calculate Blue’s debt to equity ratio. (Note: Round answer to three decimal places.)

To determine

Debt to Equity Ratio:

Debt to equity ratio is calculated to determine the leverage position of the company. It compares the total liabilities of the company with it total shareholders’ equity. The debt to equity ratio is calculated by dividing the Total Liabilities by Total Stockholder’s Equity. The formula to calculate Debt to equity ratio is as follows:

Debt to equity ratio = Total liabilitiesTotal Stockholder’s Equity

To calculate:

The debt to equity ratio.

Explanation

The debt to equity ratio is calculated as follows:

Total Liabilities = 2,000,000

Total Stockholder’s Equity = Total...

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