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Chapter 12: Q29E (page 662)

Computing the debt to equity ratio

Ludwig Corporation has the following data as of December 31, 2018:

Total Current Liabilities \( 36,210 Total Stockholders’ Equity \) ?

Total Current Assets 58,200 Other Assets 36,800

Long-term Liabilities 139,630 Property, Plant, and Equipment, Net 206,440

Compute the debt to equity ratio at December 31, 2018.

Short Answer

Expert verified

The debt-to-equity ratio of the company is 1.46

Step by step solution

01

Definition of debt-to-equity ratio

The debt-to-equity ratio is a financial ratio that shows the proportion of debt and the shareholder’s equity.

02

Calculation of the debt-to-equity ratio

DebttoEquity=TotalDebtTotalShareholder'sEquity=$197,830$134,600=1.46

Working Notes:

Total Current Assets

$58,200

Other Assets

$36,800

Plant and Equipment

$206,440

Total Assets

$301,440

Less: Current Liabilities

($36,210)

Less: Long-term Liabilities

($139,630)

Total Shareholder’s Equity

$134,600

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