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skad [1K]
3 years ago
5

SME Company has a debt-equity ratio of .60. Return on assets is 7.5 percent, and total equity is $486,000. a. What is the equity

multiplier
Business
1 answer:
polet [3.4K]3 years ago
7 0

Answer:Equity multiplier=1.6

Explanation:

Debt equity ratio is given as  debt/equity , Therefore

Debt  = Debt equity ratio  X Equity

=0.60 x $486,000

= $291,600

The  Total assets given as Liability(debt+equity)  will now be

=$291,600+$486,000

=$777,600.

Therefore Equity multiplier, Total assets/Total equity

=(777,600/486,000)=1.6

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Answer:

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