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From the following information, calculate debt to equity ratio: total debt 600000; current liabilities 200000 and capital employed 600000?
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From the following information, calculate debt to equity ratio: total ...
Calculation of Debt to Equity Ratio
Debt to equity ratio is a financial metric used to evaluate a company's financial leverage. It shows the proportion of debt a company has relative to its equity.
Given Information:
- Total Debt: $600,000
- Current Liabilities: $200,000
- Capital Employed: $600,000
Calculation:
Debt to Equity Ratio = Total Debt / Equity
Equity can be calculated as:
Equity = Capital Employed - Total Debt
Equity = $600,000 - $600,000
Equity = $0
Debt to Equity Ratio = $600,000 / $0
Debt to Equity Ratio is undefined when equity is zero.
Explanation:
In this case, the debt to equity ratio is undefined because the equity of the company is zero. This could indicate that the company is heavily reliant on debt to finance its operations, which poses a risk as it may have difficulties in repaying its debts in the future. It is important for companies to maintain a healthy balance between debt and equity to ensure financial stability and sustainability. A high debt to equity ratio could also signal to investors that the company is highly leveraged and may be more risky to invest in.
Debt to equity ratio is a financial metric used to evaluate a company's financial leverage. It shows the proportion of debt a company has relative to its equity.
Given Information:
- Total Debt: $600,000
- Current Liabilities: $200,000
- Capital Employed: $600,000
Calculation:
Debt to Equity Ratio = Total Debt / Equity
Equity can be calculated as:
Equity = Capital Employed - Total Debt
Equity = $600,000 - $600,000
Equity = $0
Debt to Equity Ratio = $600,000 / $0
Debt to Equity Ratio is undefined when equity is zero.
Explanation:
In this case, the debt to equity ratio is undefined because the equity of the company is zero. This could indicate that the company is heavily reliant on debt to finance its operations, which poses a risk as it may have difficulties in repaying its debts in the future. It is important for companies to maintain a healthy balance between debt and equity to ensure financial stability and sustainability. A high debt to equity ratio could also signal to investors that the company is highly leveraged and may be more risky to invest in.
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From the following information, calculate debt to equity ratio: total debt 600000; current liabilities 200000 and capital employed 600000?
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From the following information, calculate debt to equity ratio: total debt 600000; current liabilities 200000 and capital employed 600000? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about From the following information, calculate debt to equity ratio: total debt 600000; current liabilities 200000 and capital employed 600000? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for From the following information, calculate debt to equity ratio: total debt 600000; current liabilities 200000 and capital employed 600000?.
From the following information, calculate debt to equity ratio: total debt 600000; current liabilities 200000 and capital employed 600000? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about From the following information, calculate debt to equity ratio: total debt 600000; current liabilities 200000 and capital employed 600000? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for From the following information, calculate debt to equity ratio: total debt 600000; current liabilities 200000 and capital employed 600000?.
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