Rocky owns a $184,000 town house and still has an unpaid mortgage of $149,000. In addition to his mortgage, he has the following liabilities:

Visa	$ 750
MasterCard	370
Discover card	550
Education loan	3,400
Personal bank loan	550
Auto loan	5,900
Total	$ 11,520
Rocky’s net worth (not including his home) is about $38,000. This equity is in mutual funds, an automobile, a coin collection, furniture, and other personal property.

What is Rocky’s debt-to-equity ratio?

Note: Round your answer to 2 decimal places.

The **debt-to-equity ratio** is a measure of financial leverage and is calculated as:

\[
\text{Debt-to-Equity Ratio} = \frac{\text{Total Liabilities}}{\text{Total Equity}}
\]

### Step 1: Calculate Total Liabilities
Rocky's total liabilities are the sum of his mortgage and other liabilities:
- Unpaid mortgage: \$149,000
- Visa: \$750
- MasterCard: \$370
- Discover card: \$550
- Education loan: \$3,400
- Personal bank loan: \$550
- Auto loan: \$5,900

Adding these together:

\[
\text{Total Liabilities} = 149,000 + 750 + 370 + 550 + 3,400 + 550 + 5,900 = 160,520
\]

### Step 2: Calculate Total Equity
Rocky's net worth (equity), excluding his home, is \$38,000.

### Step 3: Calculate Debt-to-Equity Ratio
Now, apply the formula:

\[
\text{Debt-to-Equity Ratio} = \frac{160,520}{38,000} \approx 4.22
\]

So, Rocky’s debt-to-equity ratio is **4.22**.

Would you like more details or have any questions?

Here are 5 related questions you might consider:
1. What does a high debt-to-equity ratio indicate about someone's financial health?
2. How would selling the automobile impact Rocky's debt-to-equity ratio?
3. How does the debt-to-equity ratio differ for personal finance vs corporate finance?
4. What steps could Rocky take to improve his debt-to-equity ratio?
5. How would paying off his education loan affect his liabilities?

**Tip:** A lower debt-to-equity ratio typically indicates better financial stability.

Rocky owns a $184,000 town house and still has an unpaid mortgage of $149,000. In addition to his mortgage, he has the following liabilities:

Visa	$ 750
MasterCard	370
Discover card	550
Education loan	3,400
Personal bank loan	550
Auto loan	5,900
Total	$ 11,520

Rocky’s net worth (not including his home) is about $38,000. This equity is in mutual funds, an automobile, a coin collection, furniture, and other personal property.

What is Rocky’s debt-to-equity ratio?

Learn how to calculate Rocky's debt-to-equity ratio by using his total liabilities of $160,520 and equity of $38,000. This problem explains the concept of financial ratios, focusing on debt-to-equity ratio calculation, which is crucial for assessing financial health. Suitable for students and individuals interested in personal finance.

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