The equity multiplier is 233 1 What is the debtequity ratio

The equity multiplier is 2.33. 1) What is the debt-equity ratio? 2) What is the total debt ratio? Please show all steps.

Solution

Answer 1.

Equity Multiplier = 1 + Debt-Equity Ratio
2.33 = 1 + Debt-Equity Ratio
Debt-Equity Ratio = 1.33

Answer 2.

Equity Ratio = 1 / Equity Multiplier
Equity Ratio = 1 / 2.33
Equity Ratio = 0.43

Debt Ratio = 1 - Equity Ratio
Debt Ratio = 1 - 0.43
Debt Ratio = 0.57