Assume the following data: Long-term debt = 100; Value of leases = 20; Book value of equity = 80. Calculate the debt-equity ratio.
A)0.50
B)0.60
C)1.00
D)1.50

Question

Quizplus · Accepted Answer

The debt-equity ratio is calculated by dividing total debt by the book value of equity. Total debt includes long-term debt and the value of leases, which is 100 + 20 = 120. The book value of equity is 80. Therefore, the debt-equity ratio is 120 / 80 = 1.50.

Assume the Following Data: Long-Term Debt = 100; Value of Leases