Long Term Debt to Equity question long, something, question, adjusted

Beatnik

In SS #9 reading 35 (schweser) it says that the long term debt to equity is (long term debt / stockholder equity) but in the calculation it adds deferred taxes to the numerator….then in reading 36 under the adjusted ratio it does not add deferred taxes to the numerator…..Does anyone know if this is a mistake in the book or am I missing something….and if its a mistake do you or do you not add in deferred taxes?

Windjammer

I would check the CFAI books.
Along with that, a deferred tax liab doesn’t have an
interest cost associated with it.
In a practical sense, it depends on what you’re using the D/E for.
At some point, a profitable company will have to realize that liability, but it will be after regular debt interest expenses are paid.

pennyless

On page 171, just above the calculation for the adjusted longterm debt to equity calculations there’s a note that states that they have ignored income tax effects for simplicity.