The correct statement is that Trudy's debt-to-equity ratio is 44% of his annual salary. So, the correct option that matches the quoted statement is D.
The amount of loans taken by Trudy, including the education loan, credit cards, car loan, house rent, etc. These monthly payments are calculated as $2400, $1920, $3180, $8340 annually respectively.
Debt-To-Equity ratio
- Debt to equity ratio is a ratio that determines the percentage of debts of a person over the person's assets or equities held by such person. This can be explained with the help of the following formula,
- [tex]\rm Debt-to-Equity\ Ratio = \dfrac {Loans\ and\ Advances}{Annual\ Salary}[/tex]
- The debts of Trudy can be calculated by addition of car loan, rent, student loan, credit cards as,
- [tex]\rm Debts= 2400+1920+3180+8340\\\\\rm Debts=\$15840[/tex]
- Now applying the values of debts in to the formula to obtain the ratio as,
- [tex]\rm Debt-to-Equity\ Ratio = \dfrac {15840}{36000}\\\\\rm Debt-to-Equity\ Ratio =0.44[/tex]
- So, the debt-to-equity ratio is calculated as 44 percent.
Hence, the correct option is D that Trudy's Debt-to-Equity ratio is 44% on an annual salary of $36,000 and such amount of loans and advances.
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