Relatively easy question but I just can’t seem to figure it out…
For WACC calculation or formuals for MM, if given Debt/Assets ratio, how to convert it to Debt/Equity?
Thx
If Debt/Asset given is 20/100, this would mean there is 100-20 = 80 equity. Then Debt/Equity will be 20/80.
Suppose that D/A = 0.8. The E/A = 0.2 (= 1 – 0.8), and D/E = 0.8 / 0.2 = 4.
D/E = (D/A) / (1 – D/A).
(Note: here I’m assuming that D + E = A, so D = L. For this type of question, that’s a normal assumption, though it’s wrong in the real world.)
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The naming agani becomes tricky:
Leverage
financial leverage
Gearnign ratio
etc
The naming agani becomes tricky:
Leverage
financial leverage
Gearnign ratio
etc