UOAB Debt to Equity Ratio Calculation Discussion
I’m working on a public health discussion question and need an explanation and answer to help me learn.
Dear Class, the rubric for this week’s discussion post is modified. For full credit, you must 1) follow the link and calculate the debt to equity ratio for two companies; and 2) explain which company of the two you believe uses the most debt financing on average. You will not be able to see the posts of your classmates until you post. You do NOT need to respond to the posts of any of your classmates this week to receive full credit.
https://money.cnn.com/data/sectors/health_services/ (Links to an external site.) (You can access the Financials for companies by clicking the hyper link assigned to the stock symbol/company name abbreviation.)
Capital structure theory identifies several factors that are important to capital structure decision making. Two of the most important factors are the amount of business risk and the asset structure of the organization. Organizations with greater business risk tend to use less debt-financing, and organizations with a large amount of brick-and-mortar assets, which can be used as loan collateral, tend to use more debt financing. Higher-leverage ratios tend to indicate a company with higher risk to shareholders.
The debt/equity ratio is calculated by dividing total liabilities by total shareholder equity.