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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).

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A firm has  total debt ratio of 65. What is the equity multiplier .pdf

  • 1. 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).