Delavan Company has fixed assets of $5 billion, current assets of $2 billion, long-term liabilities of $2 billion, current liabilities of $1 billion, and owners' equity of $2 billion. What is Delavan's debt-to-equity ratio?
A) 1.5
B) 0.9
C) 1.2
D) 0.4
E) 0.8

Question

Quizplus · Accepted Answer

The debt-to-equity ratio is calculated by dividing total liabilities by owners' equity. Total liabilities are $3 billion ($2 billion long-term + $1 billion current), and owners' equity is $2 billion. Thus, the ratio is $3 billion / $2 billion = 1.5.

Delavan Company Has Fixed Assets of $5 Billion, Current Assets