Asked by Braeli Payne on May 14, 2024
Verified
The liabilities of a company at the end of the year are $530,000 and the total stockholders' equity at the end of the year is $1,080,000. The debt to stockholders' equity ratio is: (Round your answer two decimal places.)
A) 0.49 to 1.
B) 0.33 to 1.
C) 0.67 to 1.
D) 3.04 to 1.
Debt to Stockholders' Equity Ratio
A financial ratio indicating the relative proportion of shareholder's equity and debt used to finance a company's assets.
Liabilities
Financial obligations or debts that a company owes to others, usually as a result of past transactions or events.
Total Stockholders' Equity
The total net value belonging to the owners of a corporation, calculated as the difference between total assets and total liabilities.
- Acquire knowledge and perform calculations of diverse financial ratios pertinent to managing debt.
- Determine and compute ratios assessing the risk faced by creditors in comparison to the risk assumed by shareholders.
Verified Answer
JJ
Ja'Quaris JamisonMay 16, 2024
Final Answer :
A
Explanation :
The debt to stockholders' equity ratio is calculated as total liabilities divided by total stockholders' equity. So, $530,000 / $1,080,000 = 0.4907, which rounds to 0.49 to 1.
Learning Objectives
- Acquire knowledge and perform calculations of diverse financial ratios pertinent to managing debt.
- Determine and compute ratios assessing the risk faced by creditors in comparison to the risk assumed by shareholders.