Which financial leverage ratio is used with two other ratios to mathematically produce the return on equity ratio?
1 answer:
Answer: c. Total Assets/ Equity
Explanation:
To measure the Return on Equity with 3 ratios, the <em>DuPont Analysis</em> can be used. This is a technique of deconstructing the Return on Equity ratio into various constituent ratios so that their effect on Return on Equity is better know.
The basic DuPont Analysis is;
Return on Equity =
Total Assets/ Equity or the Assets to Shareholder Equity ratio is the answer.
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Answer:
The fed needs to purchase bonds worth $20 from the banks to increase money supply by $200.
Explanation:
The Federal Reserve wants to increase the money supply by $200.
The reserve requirement is 10%.
The fed can increase the money supply by purchasing bonds from commercial banks.
The money supply will increase by money multiplier times worth of bonds.
Increase in money supply =
$200 =
Worth of bonds =
Worth of bonds = $20
So the fed needs to purchase bonds worth $20 from the banks to increase money supply by $200.