If the market value of debt is $150 and the market value of equity is $350, what is the debt-to-equity ratio?

Unlock all questions

This demo includes only 20 questions. Upgrade to access hundreds of questions, flashcards, exam simulations, and disable ads.

Full question bankExam simulationsFlashcards
From $24.99Unlock all

Study for the Finance and Investment Challenge Test. Approaches include flashcards and multiple-choice questions with hints and explanations. Ready yourself to ace the exam!

Multiple Choice

If the market value of debt is $150 and the market value of equity is $350, what is the debt-to-equity ratio?

Explanation:
Debt-to-equity ratio measures financial leverage by comparing what a company owes to what it owns. It is found by dividing total debt by total equity. With debt of 150 and equity of 350, 150 divided by 350 equals approximately 0.4286, which rounds to 0.43. This means there are about 0.43 dollars of debt for every dollar of equity. If you think about the other values, they would require different debt amounts given the same equity, so they don’t match the 150 debt here. The ratio you get is 0.43.

Debt-to-equity ratio measures financial leverage by comparing what a company owes to what it owns. It is found by dividing total debt by total equity. With debt of 150 and equity of 350, 150 divided by 350 equals approximately 0.4286, which rounds to 0.43. This means there are about 0.43 dollars of debt for every dollar of equity. If you think about the other values, they would require different debt amounts given the same equity, so they don’t match the 150 debt here. The ratio you get is 0.43.

More Multiple Choice Questions
Subscribe

Get the latest from Passetra

You can unsubscribe at any time. Read our privacy policy