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Consider this simplified balance sheet for Geomorph Trading: Current assets $ 275 Current liabilities $ 210 Long-term assets 650 Long-term debt 205 Other liabilities 120 Equity 390 $ 925 $ 925 a. What is the company’s debt-equity ratio?

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Answer:

1.37

Explanation:

Total Debts (D) = Current liabilities + Long-term debt + Other liabilities

Total Debts (D) = $210 + $205 + $120 = $535

Owner's Equity (E) = $390

The debt-equity ratio (DER) is given by:

[tex]DER = \frac{D}{E} =\frac{535}{390}\\DER=1.37[/tex]

Geomorph Trading’s debt-equity ratio is 1.37

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