The following balance sheet information is provided for Santana Company for Year

Question

The following balance sheet information is provided for Santana Company for Year 2:

What is the company's debt to equity ratio?

A. 33.28%

B. 40.73%

C. 54.03%

D. 135.11%

Assets Cash $ 6,000 Accounts receivable 12,150 Inventory 15,000 Prepaid expenses 1,800 Plant and equipment, net of depreciation 19,700 Land 13,600 Total assets $ 68,250 Liabilities and Stockholders' Equity Accounts payable $ 2,910 Salaries payable 8,030 Bonds payable (Due in ten years) 13,000 Common stock, no par 15,500 Retained earnings 28,810 Total liabilities and stockholders' equity $ 68,250

Explanation / Answer

Total debt=Accounts payable+Salary payable+Bonds payable

=(2910+8030+13000)=$23940

Total equity=Common stock, no par+Retained earnings

=(15500+28810)=$44310

Hence debt to equity ratio=Total debt/Total equity

=$23940/$44310

=54.03%(Approx).

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