Homework 1-5

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University of Alabama, Huntsville *

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330

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Economics

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Feb 20, 2024

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pdf

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2

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1/18/24, 4:16 PM Assignment Print View https://ezto.mheducation.com/api/caa/activity/C15Print?jwt=eyJhbGciOiJSUzI1NiJ9.eyJlbnZpcm9ubWVudCI6InByb2QiLCJpc3MiOiJlenQiLCJwcmludFVSTCI6I… 2/3 5. Award: 10.00 points Mobius, Incorporated, has a total debt ratio of .41. a. What is its debt-equity ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is its equity multiplier? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Debt-equity ratio 0.69 times b. Equity multiplier 1.69 times References Worksheet Learning Objective: 03-02 Compute and, more importantly, interpret some common ratios. Difficulty: 1 Basic Section: 3.3 Ratio Analysis Mobius, Incorporated, has a total debt ratio of .41. a. What is its debt-equity ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is its equity multiplier? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) +/-0.01 +/-1% a. Debt-equity ratio 0.69 times b. Equity multiplier 1.69 times Explanation:
1/18/24, 4:16 PM Assignment Print View https://ezto.mheducation.com/api/caa/activity/C15Print?jwt=eyJhbGciOiJSUzI1NiJ9.eyJlbnZpcm9ubWVudCI6InByb2QiLCJpc3MiOiJlenQiLCJwcmludFVSTCI6I… 3/3 Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the calculation. Total debt ratio = .41 = TD/TA Substituting total debt plus total equity for total assets, we get: .41 = TD/(TD + TE) Solving this equation yields: .41(TE) = .59(TD) Debt-equity ratio = TD/TE Debt-equity ratio = .41/.59 Debt-equity ratio = .69 Equity multiplier = 1 + D/E Equity multiplier = 1.69
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