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TESLA Inc is a maker of AUTOMOBILES. It has $2 million in assets and total equity...

TESLA Inc is a maker of AUTOMOBILES. It has $2 million in assets and total equity of $250,000. What is the company’s debt ratio?

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Answer #1
  • Debt Ratio = Total Debt/Total Assets

Calculation of Debt Ratio:

Particulars Amount ($)
Total Debts        1,750,000
Total Assets        2,000,000
Debt Ratio                  0.88
  • Debt Ratio below 1 indicates that a larger portion of company's assets is funded by Equity.

Explanation:

  • Total Equity = Assets less Liabilities
  • Liabilities = Assets less Equity
  • = $ 2,000,000 less $ 250,000
  • = $ 1,750,000
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