The Cliplink Company has an equity multiplier of 3.36? What are the debt ratio and debt to equity ratios of Cliplink?

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Quizplus · Accepted Answer

The equity multiplier is calculated as Total Assets / Equity. An equity multiplier of 3.36 implies that for every dollar of equity, there are 3.36 dollars of assets. The debt ratio is calculated as (Total Assets - Equity) / Total Assets, which is 1 - (1/3.36) = 0.70. The debt to equity ratio is (Total Assets - Equity) / Equity, which is 3.36 - 1 = 2.36.

The Cliplink Company Has an Equity Multiplier of 3