Practice Debt-to-equity Ratio Formula (19.2.2.a) - Financial Statement Analysis – Ratio Analysis

Practice: Debt-to-Equity Ratio Formula

Lesson 19.2.2.aFinancial Statement Analysis – Ratio Analysis

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9 questions

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6 sample questions

Question 1.
What is the Debt-to-Equity Ratio if a company has total debt of $200,000 and shareholders' equity of $400,000?
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Use the formula D/E = Total Debt ÷ Shareholders' Equity.
Question 2.
True or False: A higher Debt-to-Equity Ratio indicates that a company is less risky.
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Think about how debt impacts financial stability.
3Question 3.
What does the Debt-to-Equity Ratio indicate?
- The total profit of a company
- The company's market share
- The proportion of debt relative to equity
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Consider how debt and equity relate to financing.
4Question 4.
True or False: A low Debt-to-Equity Ratio is always bad.
- True
- False
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Reflect on financial risk and stability factors.
Question 5.
A startup has a Debt-to-Equity ratio of 3. Describe potential challenges they may face if they continue this path without changes.
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Consider what high debt could mean for cash flow and investor relations.
Question 6.
Given two companies, one with a D/E of 1.2 and the other 0.8, discuss which one might be more attractive to a conservative investor and why.
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Think about how risk influences investment decisions.

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