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5 000-0
Solution
Equity multiplier = Total Assets / Equity
or, Equity Multiplier = (Total Assets / Equity) x (Net Profit / Net Profit) [ Muliply Numerator
and denominator by Net Profit]
or, Equity Multiplier = (Total Assets / Net profit) x (Equity / Net profit)
or, Equity Multiplier = (1 / ROA) x (ROE) = ROE / ROA = 9% / 1% = 9 (first option)

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5 000-0 SolutionEquity multiplier = Total Assets Equityor, .pdf

  • 1. 5 000-0 Solution Equity multiplier = Total Assets / Equity or, Equity Multiplier = (Total Assets / Equity) x (Net Profit / Net Profit) [ Muliply Numerator and denominator by Net Profit] or, Equity Multiplier = (Total Assets / Net profit) x (Equity / Net profit) or, Equity Multiplier = (1 / ROA) x (ROE) = ROE / ROA = 9% / 1% = 9 (first option)