Thesis: Debt to equity ratio of Johnson Arabia LLC

Sample Thesis Paper

The next tool that has been used as a part of the analysis is the debt to equity ratio. This ratio is obtained by dividing the total debt with the total equity. This ratio measures how the company is dealing with its debt against the capital which is being implanted by the owners of the company. If the liabilities part of the ratio exceeds the equity or net worth of the ration than it means that the creditors have more stake in the company as compared to the shareholders.

The debt to equity ratio shows the proportion between equity and debt which the company is using to finance their assets. A higher debt to equity ratio means that the company has a hostile policy in financing their growth with debts. One thing which should be remembered in this regard is that if the ration is greater than one than it shows that the company’s assets are mainly financed by debt and similarly a ration which is less than one shows that majority of the asset’s financing is done with the equity. If we analyze the debt to equity ratio of Johnson Arabia it shows that there is mixed trend in this section. This means that in the year 2004 the debt to equity ratio is 2.28 which is above 1 and it shows that the investors were quiet happy in investing their money with Johnson Arabia and they had their trust maintain with the company. Similarly if we move forward the debt to equity ratio for Johnson Arabia is constantly at its decline this shows that now the company is financing most of its assets through their own money.

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