Neas-Seminars

Practice Problem 17.1


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By sheridan - 12/19/2007 1:59:05 PM

It says a 25% debt-to-equity ratio means than debt is 20% of total capital and equity is 80% of total capital.

Why isn't it 25% and 75%?  What am I missing?

[NEAS: Suppose total capital is $100, debt is $20, and equity is $80. The ratio of debt to equity is $20 / $80 = 25%.]