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Computing Long-term Solvency Ratios TPITA Total Debt Ratio = (TA -TE)/TA (5,606 - 2,768)/5,606 = 50.62%...

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

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Answer #1

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%

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