The Debt to Equity Ratio: Definition, Calculation, & Usefulness

Instructions:

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question 1 of 3

Based on the following balance sheet information, what is Company Q's debt to equity ratio?

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1. What is the consequence of high debt to equity ratios across an industry?

2. Why would a low debt to equity ratio not necessarily be a good thing?

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About This Quiz & Worksheet

Expert instructors wrote this quiz/worksheet combo on the debt to equity ratio for your quick and easy review. In a series of questions designed to check your comprehension, you'll be asked about the issues associated with both high and low debt to equity ratios and what a debt to equity ratio of 5 signifies.

Quiz & Worksheet Goals

This quiz is designed to test your ability to:

  • Calculate a debt to equity ratio based on example data
  • Outline the potential consequences of a high debt to equity ratio
  • Explain why a low debt to equity ratio doesn't necessarily mean something good
  • Identify the type of ratio the debt to equity ratio is
  • Discuss what a debt to equity ratio of 5 means

Skills Practiced

  • Reading comprehension - ensure that you draw the most important information from the related debt to equity ratio lesson
  • Information recall - access the knowledge you've gained regarding how to calculate a debt to equity ratio
  • Critical thinking - apply relevant concepts to examine information about low debt to equity ratios in a different light

Additional Learning

For more information about this subject, take a look at our lesson called The Debt to Equity Ratio: Definition, Calculation, & Usefulness. In addition to the content found on this quiz, this lesson also provides you with information on how to:

  • Explain what equity means
  • Identify the government body with rules in place about companies' debt to equity ratio
  • Discuss what high debt to equity ratios across the board might indicate
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