Question

Rajan Company's most recent balance sheet reported total assets of $2.10 million, total liabilities of $0.70 million, and total equity of $1.40 million. Its Debt to equity ratio is:

Answer 1

0.5.

Step-by-step explanation:

Assets - Liabilities = Owner's Equity.

As the name states, the debt to equity ratio is simply obtained by dividing total debt (liabilities) by the total equity, total assets should not be included:

`DER = (0.70)/(1.40) =0.5`

Rajan Company's debt to equity ratio is 0.5.