Shipley Corporation has provided the following data from its most recent balance sheet: The debt-to-equity ratio is closest to:
A)0.29
B)3.47
C)0.22
D)0.78

Question

Shipley Corporation has provided the following data from its most recent balance sheet:  The debt-to-equity ratio is closest to:
A)0.29 
B)3.47 
C)0.22 
D)0.78

Quizplus · Accepted Answer

The debt-to-equity ratio is calculated by dividing total liabilities by total equity.

Debt-to-equity ratio = Total liabilities / Total equity
Debt-to-equity ratio = $8,440,000 / $2,430,000

Debt-to-equity ratio = 3.47

Therefore, the debt-to-equity ratio is closest to 3.47, which corresponds to answer choice (B). Debt-to-equity ratio = Total liabilities ÷ Stockholders' equity
= $590,000 ÷ $170,000 = 3.47

Shipley Corporation Has Provided the Following Data from Its Most