Bailey Corporation reported the following information for 20X1: $$\begin{array} { | l | r | }
\hline \text { Profit } & \$ 10,000 \
\hline \text { Total assets } & 16,000 \
\hline \text { Total shareholders' equity } & 8,000 \
\hline
\end{array}$$ Bailey's debt/equity ratio was
A) .33 or 33%.
B) 1.0 or 100%.
C) 1.25 or 125 %.
D) 3.0 or 300%.

Question

Bailey Corporation reported the following information for 20X1: $$\begin{array} { | l | r | } 
\hline \text { Profit } & \$ 10,000 \
\hline \text { Total assets } & 16,000 \
\hline \text { Total shareholders' equity } & 8,000 \
\hline
\end{array}$$ Bailey's debt/equity ratio was
A) .33 or 33%.
B) 1.0 or 100%.
C) 1.25 or 125 %.
D) 3.0 or 300%.

Quizplus · Accepted Answer

The debt/equity ratio is calculated by dividing total liabilities (debts) by shareholders' equity. Given total assets of $16,000 and shareholders' equity of $8,000, the total liabilities can be found by subtracting equity from assets: $16,000 - $8,000 = $8,000. Thus, the debt/equity ratio is $8,000 / $8,000 = 1.0 or 100%.

Bailey Corporation Reported the Following Information for 20X1 Bailey's Debt/equity Ratio Was A)

Bailey Corporation Reported the Following Information for 20X1 Bailey's Debt/equity Ratio Was
A)