Calculate the Amount of Owner's Equity and the Two Leverage

question 33

Short Answer

Calculate the amount of owner's equity and the two leverage ratios: $$\begin{array} { l l l l l l } & & & & \text { Debt to } & \text { Debt to } \\& \text { Total } & \text { Total } & \text { Owner's } & \text { Assets } & \text { Equity } \\\text { Company } & \text { Assets } & \text { Liabilities } & \text { Equity } & \text { Ratio } & \text { Ratio } \\\text { Near East Furniture } & \$ 538,200 & \$ 314,500 & & &\end{array}$$

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Definitions:

CPI

Consumer Price Index, a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

Nominal Interest Rate

The interest rate before adjustments for inflation, reflecting the rate at which money can be borrowed or invested.

Real Interest Rate

The interest rate adjusted for inflation, more accurately reflecting the true cost of borrowing or the true yield on savings.

Deflation

A decrease in the general price level of goods and services in an economy over a period, opposite of inflation, often indicating a reduction in consumer demand and economic activity.