Debt and Equity Calculations

This video tutorial explains how to calculate the long-term debt to equity ratio and the debt to equity ratio using example problems. It covers the calculation of shareholder equity, the importance of these ratios in evaluating a company's financial health, and how to derive these ratios from given financial data. The video also discusses the return on equity (ROE) and its relation to net income and shareholder equity.

What is the formula for calculating the long-term debt to equity ratio?

• Long-term debt divided by total assets

• Long-term debt divided by shareholder equity

• Total debt divided by shareholder equity

• Total assets divided by total liabilities

If a company's long-term debt to equity ratio is less than one, what does it indicate?

• The company is at risk of bankruptcy

• The company is doing okay or good

• The company has no debt

• The company has a lot of debt

How do you calculate shareholder equity?

• Total assets minus total liabilities

• Total debt minus long-term debt

• Total liabilities minus total assets

• Net income times return on equity

What is the debt to equity ratio for a company with 150 million in total debt and 500 million in equity?

• 0.25

• 0.30

• 0.35

• 0.40

How is the return on equity (ROE) calculated?

• Total debt divided by net income

• Net income divided by shareholder equity

• Net income divided by total assets

• Shareholder equity divided by net income

If a company has a net income of 1 billion and an ROE of 10%, what is the shareholder equity?

• 15 billion

• 20 billion

• 10 billion

• 5 billion

What is the long-term debt value if the long-term debt to equity ratio is 0.20 and the equity is 10 billion?

• 4 billion

• 1 billion

• 2 billion

• 3 billion

How do you calculate total debt using the debt to equity ratio?

• Total debt is the debt to equity ratio times long-term debt

• Total debt is the debt to equity ratio times shareholder equity

• Total debt is the debt to equity ratio times total assets

• Total debt is the debt to equity ratio times net income

What is the total debt if the debt to equity ratio is 0.30 and the equity is 10 billion?

• 4 billion

• 5 billion

• 3 billion

• 2 billion

Which of the following is NOT a method to calculate shareholder equity?

• Total debt divided by long-term debt

• Net income divided by return on equity

• Total assets minus total liabilities

• Net income times return on equity