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If a firm has $100,000 debt and $100,000 equity, then a. The return on equity ratio is 1. b. The debt-to-equity ratio is 1. c. The return on assets ratio is 0.5. d. The firm has too much debt.

If a firm has $100,000 debt and $100,000 equity, then a. The return on equity ratio is 1. b. The debt-to-equity ratio is 1. c. The return on assets ratio is 0.5. d. The firm has too much debt.

Auditing: A Risk Based-Approach (MindTap Course List)
Auditing: A Risk Based-Approach (MindTap Course List)
11th Edition
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Chapter14: Completing A Quality Audit
Section: Chapter Questions
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If a firm has $100,000 debt and $100,000 equity, then a. The return on equity ratio is 1. b. The debt-to-equity ratio is 1. c. The return on assets ratio is 0.5. d. The firm has too much debt.
Transcribed Image Text:If a firm has $100,000 debt and $100,000 equity, then a. The return on equity ratio is 1. b. The debt-to-equity ratio is 1. c. The return on assets ratio is 0.5. d. The firm has too much debt.
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