The debt to equity ratio is calculated by dividing total debt by total equity. If a firm has a debt to equity ratio of 50%, it means that for every dollar of equity, it has 50 cents in debt.

However, the overall debt ratio (also known as the debt ratio) is calculated by dividing total debt by total assets.

To find the overall debt ratio, we need to know the relationship between debt, equity, and assets. In a simple financial structure, assets are funded by either debt or equity. So, total assets equal total debt plus total equity.

If the debt to equity ratio is 50%, it means that debt is half of equity. So, for every $1.50 in assets ($1 from equity and $0.50 from debt), $0.50 is funded by debt.

Therefore, the overall debt ratio is $0.50 (debt) / $1.50 (assets) = 0.33 or 33%.

So, if a firm has a debt to equity ratio of 50%, its overall debt ratio must be 33%.

Question

The debt to equity ratio is calculated by dividing total debt by total equity. If a firm has a debt to equity ratio of 50%, it means that for every dollar of equity, it has 50 cents in debt.

However, the overall debt ratio (also known as the debt ratio) is calculated by dividing total debt by total assets.

To find the overall debt ratio, we need to know the relationship between debt, equity, and assets. In a simple financial structure, assets are funded by either debt or equity. So, total assets equal total debt plus total equity.

If the debt to equity ratio is 50%, it means that debt is half of equity. So, for every $1.50 in assets ($1 from equity and $0.50 from debt), $0.50 is funded by debt.

Therefore, the overall debt ratio is $0.50 (debt) / $1.50 (assets) = 0.33 or 33%.

So, if a firm has a debt to equity ratio of 50%, its overall debt ratio must be 33%.

Knowee AI · Accepted Answer

The debt to equity ratio is calculated by dividing total debt by total equity. If a firm has a debt to equity ratio of 50%, it means that for every dollar of equity, it has 50 cents in debt.

However, the overall debt ratio (also known as the debt ratio) is calculated by dividing total debt by total assets.

To find the overall debt ratio, we need to know the relationship between debt, equity, and assets. In a simple financial structure, assets are funded by either debt or equity. So, total assets equal total debt plus total equity.

If the debt to equity ratio is 50%, it means that debt is half of equity. So, for every $1.50 in assets ($1 from equity and $0.50 from debt), $0.50 is funded by debt.

Therefore, the overall debt ratio is $0.50 (debt) / $1.50 (assets) = 0.33 or 33%.

So, if a firm has a debt to equity ratio of 50%, its overall debt ratio must be 33%.

Question 2If a firm has a debt to equity ratio of 50%, its overall debt ratio must be:1 point33%50%67%100%150%

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