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Business Accounting Managerial Accounting: The Cornerstone of Business Decision-Making

Ernst Company’s balance sheet shows total liabilities of $32,500,000, total stockholders’ equity of $8,125,000, and total assets of $40,625,000. Required: Note : Round answers to two decimal places. 1. Calculate the debt ratio. 2. Calculate the debt-to-equity ratio.

Ernst Company’s balance sheet shows total liabilities of $32,500,000, total stockholders’ equity of $8,125,000, and total assets of $40,625,000. Required: Note : Round answers to two decimal places. 1. Calculate the debt ratio. 2. Calculate the debt-to-equity ratio.

Solution Summary: The author explains that debt ratio is a leverage ratio that evaluates the proportion of total liabilities to total assets.

Managerial Accounting: The Cornerstone of Business Decision-Making

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN: 9781337115773

Author: Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher: Cengage Learning

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Chapter 15, Problem 17BEA

Ernst Company’s balance sheet shows total liabilities of $32,500,000, total stockholders’ equity of $8,125,000, and total assets of $40,625,000.

Required:

Note: Round answers to two decimal places.

1. Calculate the debt ratio.
2. Calculate the debt-to-equity ratio.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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Managerial Accounting: The Cornerstone of Business Decision-Making

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