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you are considering a stock investment in one of two firms lots of debt inc and...

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 36 million in assets with 33 million in debt and 3 million in equity. lots of equity inc finances its 36 million in assests with 3 million in debt and 33 million in equity? calculate the debt ratio? calculate the equity multiplier? Debt to equity?

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Answer #1

Answer : Debt Ratio : Total Debt / Total Assets

Lots of Debt Inc. = 33 million / 36million

= 91.67%

Lots of Equity Inc. = 3 million / 36million

= 8.33%

Equity Multiplier = Total Assets / Total Equity

Lots of Debt Inc. = 36 million / 3 million

= 12 times

Lots of Equity Inc. = 36 million / 33 million

= 1.091 times

Debt to Equity Ratio = Debt / Equity

Lots of Debt Inc. = 33 million / 3 million

= 11 times

Lots of Equity Inc. = 3 million / 33 million

= 0.091 times

  

  

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