On its December 31 balance sheet, XYZ Company reported total assets of \$880,000 and total liabilities of \$560,000. What is the company's debt to equity ratio?

• A. .64
• B. .36
• C. .57
• D. 1.75

Answer: (D)

Verified step by step guidance

1. Understand the formula for the debt to equity ratio: \( \text{Debt to Equity Ratio} = \frac{\text{Total Liabilities}}{\text{Total Equity}} \).
2. Identify the given values from the problem: Total Assets = \$880,000 and Total Liabilities = \$560,000.
3. Calculate Total Equity using the accounting equation: \( \text{Total Equity} = \text{Total Assets} - \text{Total Liabilities} \).
4. Substitute the values into the equation: \( \text{Total Equity} = 880,000 - 560,000 \).
5. Use the calculated Total Equity to find the Debt to Equity Ratio: \( \text{Debt to Equity Ratio} = \frac{560,000}{\text{Total Equity}} \).