Use the table for the question(s) below.
Consider the following balance sheet:

-If in 2006 Luther has 10.2 million shares outstanding and these shares are trading at $16 per share,then using the market value of equity,the debt to equity ratio for Luther in 2006 is closest to:
A) 1.71
B) 1.78
C) 2.31
D) 2.35

Question

Use the table for the question(s) below.
Consider the following balance sheet:
  
-If in 2006 Luther has 10.2 million shares outstanding and these shares are trading at $16 per share,then using the market value of equity,the debt to equity ratio for Luther in 2006 is closest to:
A) 1.71 
B) 1.78 
C) 2.31 
D) 2.35

Quizplus · Accepted Answer

B) D/E = Total Debt / Total Equity
Total Debt = (notes payable (10.5) + current maturities of long-term debt (39.9) + long-term debt (239.7) = 290.1 million
Total Equity = 10.2 × $16 = 163.2, so D/E = 290.1 / 163.2 = 1.78

Use the Table for the Question(s) Below