10) If a company’s debt-asset ratio is 0.60, what are its debt-equity ratio and equity multiplier...

Question

Question

10) If a company’s debt-asset ratio is 0.60, what are its debt-equity ratio and equity multiplier respectively?

business finance

Answer 1

Answer #1

Debt-asset ratio=debt/asset

Debt=0.6 asset

Total asset=debt+equity

Equity=(1-0.6)=0.4 asset

a.Debt-equity ratio=debt/equity

=0.6 asset/0.4 asset

=1.5

b.Equity multiplier=total assets/equity

=total asset/0.4 total assets

=2.5

Answer 2

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