Please when given Debt to Equity , How do u manipulate to get Asset/Equity
DEBT/EQUITY = (ASSETS - EQUITY)/EQUITY = ASSETS/EQUITY - 1 ASSETS/EQUITY + 1 =DEBT/EQUITY
Here the accounting equation is Asset = Libilities + Shareholder equity
That means here in debt you can add back the remaining items of liability side to get the assets.
Why are we assuming that debt includes all the liabilities? According to my understanding, debt includes only interest bearing liability. What am I missing? Can anyone help?
You’re not missing anything.
Total debt is interest-bearing debt. It is not total liabilities; it excludes non-interest-bearing liabilities; e.g., wages payable, taxes payable, DTLs, accounts payable, and so on.
That said, frequently finance people are very sloppy in their language, and they’ll say “debt/equity” when they mean “liabilities/equity”; that’s the situation in this thread. (It’s not the people in this thread who got it wrong, necessarily; it’s the authors of the books they’re reading.)