Debt-to-equity ratio is:
A. calculated by dividing total liabilities by net worth.
B. calculated by dividing monthly debt payments by net monthly income.
C. determined by dividing your assets by liabilities.
D. rarely used by creditors in determining credit worthiness.
My choice is B. Is it right?
None of those answers is correct.
http://www.investopedia.com/terms/d/debtequityratio.asp#axzz27c7KFf6q
http://www.investinganswers.com/financial-dictionary/ratio-analysis/debt-equity-ratio-358
http://financial-dictionary.thefreedictionary.com/Debt-to-Equity+Ratio
No, your choice is not correct. The correct answer is A. The debt-to-equity ratio is calculated by dividing total liabilities by net worth.
No, your choice is not correct. The correct answer is A. The debt-to-equity ratio is calculated by dividing total liabilities by net worth.
To calculate the debt-to-equity ratio, you need to have two components: total liabilities and net worth.
Total liabilities refer to all the debts and obligations of a company or individual, such as loans, outstanding bills, and other financial liabilities.
Net worth, on the other hand, is the difference between the total assets and total liabilities. It represents the owner's equity or the shareholder's equity in the case of a company.
By dividing total liabilities by net worth, you get the ratio that indicates the proportion of debt financing to equity financing. This ratio is commonly used by lenders and investors to assess the financial health and risk profile of a company or individual.
Option B, which suggests dividing monthly debt payments by net monthly income, is not the correct calculation for the debt-to-equity ratio. That calculation is often used to determine the debt-to-income ratio, which measures the ability to manage debt based on income.
So, in this case, the correct answer is A, calculated by dividing total liabilities by net worth.