Question

Fincher, Inc., has a total debt ratio of .42.

What is its debt–equity ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Debt–equity ratio             times

What is its equity multiplier? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Equity multiplier             times

Answer 1

Ans.a	Total debt ratio = Total debt / Total assets
	*Total assets = Total debt + Total equity, so we can use this breakdown of total assets in the above formula.)
	Total debt ratio = Total debt / (Total debt + Total equity)
	0.42 = Total debt / (Total debt + Total equity)
	0.42 Total debt + 0.42 Total equity = Total debt
	0.42 Total equity = Total debt - 0.42 Total debt
	0.42 Total equity = 0.58 Total debt
	Debt / Equity = 0.42 / 0.58
	Debt equity ratio   =   0.72 times
Ans.b	Equity multiplier = 1 + Debt equity ratio
		1 + 0.72
		1.72 times