Question

•Blue Sky, Inc., has a total debt ratio of 0.4. Its debt-equity ratio is therefore ______times and its equity multiplier is ________times

Answer 1

Hello Sir/ Mam

Given that:

Total Debt Ratio = 0.4

Total Debt Ratio = Total Debt = 0.4 Total

Total Debt Ratio = Total Debt - = 0.4

As total debt is 0.4 times of Total assets, hence, 0.6 times is the equity.

Hence,

Debt – Equity Ratio = Debt Equity 0.4 0.6

Total Assets Equity Multiplier = - Equity 1 06 = 1.67

I hope this solves your doubt.

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