A firm has a total debt ratio of .50. What is its (TOTAL LIABILITIES / TOTAL...

A firm has a total debt ratio of .50.

What is its (TOTAL LIABILITIES / TOTAL EQUITY) ratio?

Expert Solution

Total debt ratio=Total debt/Total assets

Total debt=0.5*Total assets

Total assets=debt+equity

equity=Total assets-0.5*Total assets

=0.5*Total assets

Hence total liabilities/total equity ratio=Total liabilities/Total equity

=(0.5*Total assets)/(0.5*Total assets)

=1

jeff jeffy answered 2 years ago

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