Karma Corporation has total assets of $190,000 and total liabilities of $90,000.The corporation's debt-to-equity ratio is closest to:

A) 0.47
B) 0.90
C) 0.53
D) 0.32

Question

Karma Corporation has total assets of $190,000 and total liabilities of $90,000.The corporation's debt-to-equity ratio is closest to:A) 0.47B) 0.90C) 0.53D) 0.32

Daimiun McElwee · Accepted Answer

Final Answer : B, Explanation :  The debt-to-equity ratio is calculated as total liabilities divided by total equity.Total equity is the difference between total assets and total liabilities.So,Total Equity = Total Assets - Total Liabilities= $190,000 - $90,000= $100,000Debt-to-Equity Ratio = Total Liabilities / Total Equity= $90,000 / $100,000= 0.9Therefore, the closest option is B, which is 0.90. Debt-to-equity ratio = Total liabilities ÷ Stockholders' equity= $90,000 ÷ $100,000* = 0.90*Stockholders' equity = Total assets - Total liabilities = $190,000 - $90,000 = $100,000

Karma Corporation has total assets of $190,000 and total liabilities of $90,000.The corporation's debt-to-equity ratio is closest to:

A) 0.47
B) 0.90
C) 0.53
D) 0.32

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