Suppose that a company has a current ratio of 2, a total assets of 10.000 $, and fixed assets of 4.000 $. Moreover, short-term liabilities (debt) is half of the long-term liabilities. What is the debt-to-equity ratio?

1. 9
2. 8
3. 7
4. 6

Given current ratio = 2

I.e., current assets ÷ Current liabilities = 2

(Total assets - fixed assets) ÷ Current liabilities = 2

(10000-4000) ÷ current liabilities = 2

Current liabilities = 6000 / 2 = 3000

Current assets = 10000-4000 = 6000

Given short term liabilities is half of long term liabilities

Hence long term liabilities = 3000 x 2 = 6000

Equity = Total assets - Total liabilities

= 10000 - (3000+6000)

= 10000

So debt equity ratio = Debt ÷ Equity = (3000+6000) ÷ 1000

= 9000/1000 = 9.

Hence correct answer is Option A.