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Calculating the Debt Ratio and the Debt-to-Equity Ratio
Ernst Company’s balance sheet shows total liabilities of $32,849,300, total stockholders’ equity of $8,729,000, and total assets of $41,578,300.
Required:
1. Calculate the debt ratio. Round the percentage to two decimal places.
%
2. Calculate the debt-to-equity ratio. Round to two decimal places.
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Expert Answer
1.
Debt ratio=Debt/Total assets
=($32,849,300/$41,578,300)
=79.01%(Approx).
2.
Debt to equity ratio=Debt/Equity
=( $32,849,300/$8,729,000)
=3.76(Approx).
