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20 December, 06:16

ME Company has a debt-equity ratio of. 57. Return on assets is 7.9 percent, and total equity is $620,000. a. What is the equity multiplier?

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  1. 20 December, 06:20
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    8.06

    Explanation

    Debt equity ratio=Debt: Equity Debt:Equity=0.57 Equity=620,000 in this question Debt=620,000*0.57=353,400. Assets=Debt+Equity Assets in this case=353,400+620,000=973,400 Return on asset=Profit for the year=7.9%*973,400=76898.6 Equity Multiplier=Total Equity/Profit for the year Equity Multiplier=620,000/76898.6=8.06
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