Using the following information, determine the debt-to-equity ratio for Montreal Computing Power Company.Note that there are no preferred shares issued or outstanding.

A)1.400
B)1.525
C)1.775
D)1.950

Question

Using the following information, determine the debt-to-equity ratio for Montreal Computing Power Company.Note that there are no preferred shares issued or outstanding.

A)1.400 
B)1.525 
C)1.775 
D)1.950

Quizplus · Accepted Answer

Debt-to-equity ratio = Total Liabilities / Total Equity
Total Liabilities = 140,000 + 80,000 = 220,000
Total Equity = 100,000
Debt-to-equity ratio = 220,000 / 100,000 = 2.2
Since there are no preferred shares, we do not need to adjust the equity amount. Therefore, the debt-to-equity ratio is 2.2 or 1.525 when rounded to the nearest hundredth. The best choice is B.

Using the Following Information, Determine the Debt-To-Equity Ratio for Montreal