The following information was available for the year ended December 31, 2019: $\begin{array}{lr}
\text { Earnings before interest and taxes (operating income) } & \$ 50,000 \
\text { Interest expense } & 10,000 \
\text { Income tax expense } & 12,000 \
\text { Net income } & 28,000 \
\text { Total assets at year-end } & 200,000 \
\text { Total liabilities at year-end } & 120,000
\end{array}$ The debt/equity ratio at December 31, 2019 was:
A)40.0%
B)60.0%
C)66.7%
D)150.0%

Question

Quizplus · Accepted Answer

The debt/equity ratio is calculated as Total Liabilities divided by Total Equity. Total Equity is Total Assets minus Total Liabilities, which is $200,000 - $120,000 = $80,000. The debt/equity ratio is $120,000 / $80,000 = 1.5, or 150%.

The Following Information Was Available for the Year Ended December