What is the approximate total debt ratio for a firm with a total debt to equity ratio of .65?
A)32.1%
B)35.5%
C)37.6%
D)39.4% If total debt/equity = .65 then total liabilities/total assets = .65/1.65

Question

Quizplus · Accepted Answer

The total debt ratio is calculated as total liabilities divided by total assets. Given the total debt to equity ratio of 0.65, the total liabilities are 0.65 times the equity. Therefore, total assets are 1.65 times the equity (equity + liabilities). The total debt ratio is 0.65/1.65, which is approximately 39.4%.

What Is the Approximate Total Debt Ratio for a Firm