Levine, Inc., has a total debt ratio of .36. What is its debt-equity ratio? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)
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| Debt-equity ratio |
| What is its equity multiplier? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) |
| Equity multiplier |
| Total debt ratio = .36 = TD / TA |
| Substituting total debt plus total equity for total assets, we get: |
| .36 = TD / (TD + TE) |
| Solving this equation yields: |
| .36(TE) = .64(TD) |
| Debt-equity ratio = TD / TE |
| Debt-equity ratio = .36 / .64 |
| Debt-equity ratio = .56 |
| Equity multiplier = 1 + D/E |
| Equity multiplier = 1.56 |
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