Question

A firm has total debt of $2,500 and a debt-equity ratio of .30. What is the value of the total assets?

Answer 1

Answer:

Debt Equity Ratio

Explanation:

Debt Equity Ratio =0.30=Long term debt/Equity

0.30=2500/ Equity

Equity =8333

Total of Equity and liabilities side =Total of Assets side

Total Assets = 2500+8333=10833

Answer 2

$10,833.34

Explanation:

Given:

total debt = $2,500

Debt-equity ratio = 0.30

Total Assets = ?

Computation:

Debt-equity ratio = Long term debts / Share holder's fund

0.30 = $2,500 / Share holder's fund

Share holder's fund = $2,500 / 0.30

Shareholder's fund = $8,333.34

Total Assets = Total liabilities

Total liabilities = Shareholder's fund + debt

= $2,500 + $8,333.34

= $10,833.34

So, Total Assets is $10,833.34

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