Debt Management Ratios Trina'sTrikes,Inc.reported a debt-to-equity ratio of 2 times at the end of 2013.If the firm's total debt at year-end was $10 million,how much equity does Trina's Trikes have?
A)$2 million
B)$5 million
C)$10 million
D)$20 million

Question

Quizplus · Accepted Answer

The debt-to-equity ratio is calculated by dividing total debt by total equity. In this case, the ratio is 2, which means that for every $1 of equity, the firm has $2 of debt. Therefore, we can calculate the equity as: Equity = Total Debt / Debt-to-Equity Ratio = $10 million / 2 = $5 million. Therefore, the answer is B) $5 million.