Which components are used to calculate the total equity for determining the debt-to-equity ratio?

To calculate the total equity for determining the debt-to-equity ratio, it is essential to include all components that contribute to a company’s equity. The par value of common stock, paid-in capital, and retained earnings together represent the total equity of a company.

The par value of common stock reflects the nominal value assigned to each share, while paid-in capital represents the additional amount shareholders have invested beyond this par value. Meanwhile, retained earnings show the cumulative profits that have been reinvested in the business rather than distributed as dividends. Collectively, these components provide a comprehensive view of a company's equity position, which is crucial when assessing its financial leverage through the debt-to-equity ratio.

In contrast, the other options do not encompass the full scope of equity. Debt and cash equivalents pertain more to liabilities and liquidity rather than equity. Cash and marketable securities focus solely on liquid assets, and only considering retained earnings neglects the impact of issued stock and additional paid-in capital on the overall equity. Therefore, understanding the total equity components is critical for an accurate calculation of the debt-to-equity ratio.