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rome File Edit View History Bookmarks People Window Help McGraw-Hill Connect xBLOCK 1 HOMEWORK x Solved: Sustainable Growth. E C ezto.mheducation.com/hm.tpx E connect FINANCE FIN 3403 Business Finance: Su 1 HOMEWORK Question 7 (of 10) value: 10.00 points Fincher, Inc., has a total debt ratio of.31. What is its debt-equity ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e Debt-equity ratio What is its equity multiplier? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g Equity multiplier times times Worksheet Learning Objective: 03-02 Compute and, more important, interpret some common ratios Difficulty: 1 Basic Section: 3.2 Ratio Analysis

Solution

1. Total debt ratio = Total debt / Total assets

0.31 = Total debt / (Total debt + Total equity)

.69(Total debt) = .31(Total equity)

Total debt / Total equity = .31 / .69

Debt–equity ratio = .45

2. Equity multiplier = 1 + D/E

Equity multiplier = 1 + .45

Equity multiplier = 1.45