In its closing financial statements for its first year in business, ABC Enterpri
ID: 2774931 • Letter: I
Question
In its closing financial statements for its first year in business, ABC Enterprises, had cash of $242, accounts receivable of $850, inventory of $820, net fixed assets of $3,408, accounts payable of $700, short-term notes payable of $740, long-term liabilities of $1,100, common stock of $1,160, retained earnings of $1,620, net sales of $2,768, cost of goods sold of $1,210, depreciation of $360, interest expense of $160, taxes of $312, addition to retained earnings of $508, and dividends paid of $218.
Calculate Debt-to-equity ratio.
Explanation / Answer
Debt Equity Ratio Accounts Payable 700.00 Short term notes payable 740.00 Long term Liabilities 1,100.00 Total Liabilities 2,540.00 Common Stock 1,160.00 Retained Earnings 1,620.00 Equity 2,780.00 Debt Equity Ratio = Total Liabilities/ Shareholders Equity Debt Equity Ratio = 2540/2780 = .91