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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Brief Exercise Ratio Analysis

Whitten Corporation’s balance sheet shows the following amounts: current assets, $200,000; current liabilities, $80,000; bonds payable, $155,000; and lease obligations. $25,000. Total stockholders’ equity is $120,000.

Required:

Calculate the debt to equity ratio. (Note: Round to two 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 = Current Liabilities + Bonds Payable + Lease Obligatio...

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