Question

Use the following information to answer this question.

Thomas Company 2017 Income Statement ($ in millions)
Net sales	$	9,530
Cost of goods sold		7,760
Depreciation		465
Earnings before interest and taxes	$	1,305
Interest paid		104
Taxable income	$	1,201
Taxes		420
Net income	$	781

Thomas Company 2016 and 2017 Balance Sheets ($ in millions)
		2016			2017				2016			2017
Cash	$	230		$	260		Accounts payable	$	1,370		$	1,385
Accounts rec.		1,000			900		Long-term debt		1,100			1,300
Inventory		1,810			1,695		Common stock		3,340			3,250
Total	$	3,040		$	2,855		Retained earnings		640			890
Net fixed assets		3,410			3,970
Total assets	$	6,450		$	6,825		Total liab. & equity	$	6,450		$	6,825

What is the debt to equity ratio for 2017?

Group of answer choices

64.86%

74.04%

82.62%

45.87%

31.40%

Answer 1

Answer: The correct answer is 64.86%

Total Debt = Accounts Payable + Long term Debt
Total Debt = $1,385 + $1,300
Total Debt = $2,685

Total Equity = Common Stock + Retained Earnings
Total Equity = $3,250 + $890
Total Equity = $4,140

Debt to Equity Ratio = Total Debt / Total Equity *100
Debt to Equity Ratio = $2,685 / $4,140 *100
Debt to Equity Ratio = 64.86%