Computing Long-term Solvency Ratios TPITA Total Debt Ratio = (TA -TE)/TA (5,606 - 2,768)/5,606 = 50.62% *Debt/Equity (D/E) =TD/ TE - (5,606 - 2,768)/2,768 1.03 times Equity Multiplier (EM) = TA / TE = 1 + D/E !3! 1+ 1.03 = 2.03 * Long-term debt ratio = LTD / (LTD + TE) - 843/ (843 + 2,768) = 23.35% Ex. If D/E-0.385, what is total debt ratio? No teprodicon or diun thout consenit
Debt Equity Ratio = Total Debt/ Equity
whereas Total debt Ratio = Total Debt/ Total assets
If Debt equity Ratio is 0.385, Total debt ratio will be as Follow
Debt Equity Ratio = 0.385
It means Total Debt / Equity = 0.385
Total Debt = 0.385 Equity
Let Equity = x. then Total debt will be 0.385x and Total Assets = 1.385x
Balance Sheet | |||
Equity | x | Assets | 1.385x |
Liabilities | 0.385x | ||
Total | 1.385x | Total | 1.385x |
As we know Total debt Ratio = Total Debt/ Total assets
here total debt will be 0.385x whereas total assets will be 1.385x
Total Debt Ratio = 0.385x/1.385x
=27.80%
Get Answers For Free
Most questions answered within 1 hours.