Debt-to-Equity Ratio (book error?)

CFA Level I FRA
#1

I have a doubt about whats in the book, How do you calculate Debt-to-Equity Ratio?

It`s Total Liabilities/Total Equity or it is Financial Liabilities/Total Equity?

Because the books uses only Financial Liabilities in an example.

The Total Debt includes only Financial Liabilities or does it include all Liabilities?

Look:

https://gyazo.com/41e1f84ee086b734f450f428820ddd58
https://gyazo.com/a4e07b1f4e15c97827f0e077915781e0
https://gyazo.com/fb440e1f15912afe2da7fa9a905a926b

I`m with some seriously doubt if they did it right. Because I think total debt include all liabilities (e.g. accounts payable).

Someone please help me.

#2

Properly, it’s total debt to total equity.

Note that debt means interest-bearing liabilities. It will include such accounts as Bonds Payable, Notes Payable, Loans Payable, Leases Payable, and so on, while excluding such accounts as Accounts Payable, Wages Payable, Interest Payable, Taxes Payable, Dividends Payable, and Unearned Revenue, and so on.

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#3

Ok, got it, but why interest payable and taxes payable excluded?

#4

Because they don’t bear interest.

You don’t pay (additional) interest on Interest Payable.

You don’t pay interest on Taxes Payable.

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#5

But if the company don`t pay the Taxes Payable before they due, than they would bear interest, right?

#6

Yes.

But you’ll record Taxes Payable in, say, January when you don’t have to pay them until April. There’s no interest charged between January and April. You don’t have a contractual agreement to pay interest on Taxes Payable.

Note that you do have a contractual obligation to pay interest on Bonds Payable, Notes Payable, Loans Payable, Leases Payable, and so on.

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#7

I looked at the links you posted. I would presume that financial liabilities bear interest.

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