Question

Braam fire prevention corp. has a profit margin of 9.70 percent, total asset turnover of 1.52, and roe of 18.58 percent. what is its firm's debt-equity ratio?

Answer 1

Braam fire prevention corp. has a profit margin of 9.70 percent, total asset turnover of 1.52, and roe of 18.58 percent. The firm's debt-equity ratio will be 0.91.

What is debt- equity ratio?

A phrase used in accounting to describe the capital structure of a company is the debt-equity ratio. This ratio is computed specifically by dividing a company's total debt by its entire equity.

monetary ratios

• Financial ratios are measurements that analysts use to assess business performance and to compare those ratios with other companies in the same industry. They are evaluated according to the firm's financial statements.
• The liquidity ratios, solvency ratios, profitability ratios, and market outlook ratios are the common classes into which the financial ratios can be divided. Each lesson will highlight a different aspect of the company.
• Before performing their analysis, analysts should, however, evaluate the completeness and transparency of the provided financial statements. The financial statements could be manipulated by some internal investors for personal gain.

ROE = profit margin × asset turnover × equity multiplier

18.58% = 9.70% × 1.52 × equity multiplier

equity multiplier = 1.91

Then debt-equity ratio is calculated as:

debt-equity ratio = equity multiplier - 1

debt-equity ratio = 1.91 - 1

debt-equity ratio = 0.91

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