Homework SourseA firm has total debt ratio of 65 What is the equity multipl
A firm has total debt ratio of 65%. What is the equity multiplier? ans 2.86
Solution
total debt ratio =Total debt/Total assets
Total debt=0.65Total assets
Total assets=Total debt+Total equity
Hence total equity=(1-0.65)Total assets
=.35Total assets
Equity multiplier=Total assets/Total equity
=Total assets/0.35Total asset
=2.86(Approx).
