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gogolik [260]
3 years ago
14

You are considering a stock investment in one of two firms (Lots of Debt, Inc. and Lots of Equity, Inc.), both of which operate

in the same industry. Lots of Debt, Inc. finances its $34.25 million in assets with $32.25 million in debt and $2.00 million in equity. Lots of Equity, Inc. finances its $34.25 million in assets with $2.00 million in debt and $32.25 million in equity. Calculate the debt ratio. (Round your answers to 2 decimal places.) Calculate the equity multiplier. (Round your answers to 2 decimal places.)
Business
1 answer:
Luden [163]3 years ago
6 0

Answer:

Debt Ratio = Total Debt Total/ Assets

Equity Multiplier = Assets/Equity

<h2>Lots of Debt</h2>

Debt Ratio

= 32.5/34.25

= 0.95

Equity Multiplier

= 34.25/2

= 17.13

<h2>Lots of Equity </h2>

Debt Ratio

= 2/34.25

= 0.06

Equity Multiplier

= 34.25/32.25

= 1.06

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