Question

Boyd, Inc., has a total debt ratio of 0.31.

Requirement 1:

What is its debt-equity ratio? (Round your answer to 2 decimal places (e.g., 32.16).)

Debt-equity ratio

Requirement 2:

What is its equity multiplier? (Round your answer to 2 decimal places (e.g., 32.16).)

Equity multiplier

Answer 1

Total debt ratio= total debt/Total assets

total debt=0.31*Total assets

Total assets=debt+equity

equity=(1-0.31)*Total assets

=0.69*Total assets

Debt equity ratio=debt/equity

=(0.31*Total assets)/(0.69*Total assets)

=0.45 (Approx).

Equity multiplier=Total assets/Equity

=Total assets/(0.69*Total assets)

=1.45(Approx).