Case Study

Introduction:
This case study is to analyse the DEF company’s financial postion by calculating
the debt-to-equity ratio with the help of the given balance sheet.

Background:

Balance Sheet
As of December 31st ,2022

Assets
Cash $50,000

Accounts Receivable $75,000

Inventory $100,000
Property, Plant, and Equipment $200,000
Total Assets $425,000
Liabilities
Accounts Payable $60,000
Notes Payable $75,000
Total Liabilities $135,000
Equity
Common Stock $100,000
Retained Earnings $190,000
Total Equity $290,000
Calculation:
Debt-to-Equity ratio = Total Liabilities / Total Equity
Debt-to-Equity ratio = $135,000 / $290,000
Debt-to-Equity ratio = 0.4655

Therefore, the Debt-to-Equity ratio as of December 31st,2022 is 0.4655.

Result:
I calculated the Debt-to-Equity ratio for the given balance sheet.

Conclusion:
The Debt-to-Equity ratio is helpful for estimating company’s financial position.
So, in the case of DEF company, I calculated the Debt-to-Equity ratio as of
December 31st,2022. That is 0.4655. So, it’s important that a company should
monitor and manage it’s debt.

Nehanth G
21951A6790