12-58 EO P3 | Additional Activities of a Business Practice 12-19 Debt-to-Equity

Question

12-58 EO P3 | Additional Activities of a Business Practice 12-19 Debt-to-Equity Ratio Consider the following information: 12.000 8200 27000 93000 6200 30,000 Interest expense Exe Total current liabilities. Cash Total labilities. Total stockholders' equity 1 5,000 19000 Compute the debt-to-equity ratio assuming that () debt is defined to include all liabilities, 2) debe is defined to include just interest-bearing debt, and (3) debt is defined to include just long-term, interes bearing debt ? 12-20 Times Interest Earned Ratio Refer to Practice 12-19.Compute the times i nerest earned ratio

Explanation / Answer

The formula to calculate debt equity ratio is as under, Debt Equity ratio = Debt / Equity Answer 1 Debt = Total Current Liabilities + Long term debt = $27000 + $93000 = $120000 Equity = Total Stockholders Equity = $85000 Debt Equity ratio = $120000 / $85000 = 1.41 Answer 2 Debt = Short term debt + Long term debt = $12000 + $93000 = $105000 Equity = Total Stockholders Equity = $85000 Debt Equity ratio = $105000 / $85000 = 1.24 Answer 3 Debt = Long term debt = $93000 Equity = Total Stockholders Equity = $85000 Debt Equity ratio = $93000 / $85000 = 1.09

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