Company has debt-to-total assets ratio is 0.4. What is its debt to equity ratio

Expert Solution

Representatiion:

Assest = A

Debt = D

Equity = E

It is known that A = D + E

therefore, E = A - D

To find Debt to equity ratio, we write it as

D/E = D/(A-D)

[E is written as A - D in the above equation]

The above equation can be written as

D/E = (D/A)/[1-(D/A)]

We know that D/A is 0.4

On substituting,

D/E = 0.4/(1-0.4)

= 0.4/0.6

D/E = 0.66

jeff jeffy answered 2 years ago

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