Hey guys happy turkey day. I ran into a question and I needed to compute A/E to find ROE and it gave me the D/E ratio as .3. The answer said A/E is equivalent to (Assets +Debt)/Equity, which equals 1 + .3 = 1.3 So my question is if they give you the debt ratio, is it always the case to just add 1 and that gives you the A/E ratio as well? Algebra confuses the hell out of me sometimes.
A = L (Debt)+ E A/E = (D + E) / E = D/E + 1
can somebody comment on this some more? this confuses me as well. algebra was a looooong time ago.
A = D + E Divide both side by E you get A/E = D/E + 1 nothing more to it really. So if you are given that the D/E = .2 then A/E = 1.2