With assets of $321,000 and liabilities of $160,000, the debt/equity ratio is approximately which?

With assets of $321,000 and liabilities of $160,000, the debt/equity ratio is approximately which?

• A. 0.99:1
• B. 1:1
• C. 1.5:1
• D. 2:1

Answer: (B)

Debt-to-equity ratio shows how much debt a company has relative to the owner's equity. It is calculated as liabilities divided by equity, with equity equal to assets minus liabilities. Here, equity is 321,000 − 160,000 = 161,000. So the ratio is 160,000 ÷ 161,000 ≈ 0.9938, which is essentially 1.0 when rounded, or about 1 to 1. In practical terms, debt is nearly equal to equity, which matches the idea of a 1:1 relationship. The other options would imply clearly higher or lower leverage and aren’t as close to this result.

Debt-to-equity ratio shows how much debt a company has relative to the owner's equity. It is calculated as liabilities divided by equity, with equity equal to assets minus liabilities. Here, equity is 321,000 − 160,000 = 161,000. So the ratio is 160,000 ÷ 161,000 ≈ 0.9938, which is essentially 1.0 when rounded, or about 1 to 1. In practical terms, debt is nearly equal to equity, which matches the idea of a 1:1 relationship. The other options would imply clearly higher or lower leverage and aren’t as close to this result.