Calculate the value of total equity given the following information: total debt ratio = 0.76; total assets = $1,250.
A) $300
B) $325
C) $350
D) $375
E) $400

Question

Quizplus · Accepted Answer

The total debt ratio is defined as total debt divided by total assets. If the total debt ratio is 0.76, it means that 76% of the assets are financed by debt, leaving 24% (100% - 76%) financed by equity. Therefore, the total equity can be calculated as 24% of total assets: 0.24 * $1,250 = $300.

Calculate the Value of Total Equity Given the Following Information