Keystone Corporation's balance sheet showed the following liability and stockholders' equity amounts: Current Liabilities, $100,000; Bonds Payable, $150,000; Long-Term Lease Obligations, $20,000; Deferred Income Tax Liability, $5,000; and total stockholders' equity, $500,000. The debt-to-equity ratio is

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Business

Cassius Richardson

24 May, 10:43

Keystone Corporation's balance sheet showed the following liability and stockholders' equity amounts: Current Liabilities, $100,000; Bonds Payable, $150,000; Long-Term Lease Obligations, $20,000; Deferred Income Tax Liability, $5,000; and total stockholders' equity, $500,000. The debt-to-equity ratio is

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Ariana Anderson · Answer 1

The debt-to-equity ratio is 0.35

Explanation:

The debt to equity ratio is a ratio which includes debt and equity to check the financial leverage, profitability, performance of the company.

In mathematically,

Debt equity ratio = Debt : Equity

where,

debt includes bonds payable, long term lease obligations, and deferred income tax liability

So, debt = $150,000 + $20,000 + $5,000 = $175,000

And equity = total stockholder equity is $500,000

So, debt equity ratio = $175,000 : $500,000 = 0.35

Hence, The debt-to-equity ratio is 0.35