Question

A firm has a debt-to-equity of 0.69 and a market-to-book ratio of 3.0. What is the ratio of the book value of debt to the market value of equity?

Answer 1

0.23

Step-by-step explanation:

Debt to Equity Ratio = Total debt/ Total common equity

Market to book Ratio = Market price per share / Book value per share

Book debt to Market equity Ratio = Debt to Equity Ratio / Market to book Ratio

Book debt to Market equity Ratio = 0.69 / 3

Book debt to Market equity Ratio = 0.23

Therefore, the ratio is 0.23