If the debt ratio is 40.00%, then the equity multiplier is:

Name: If the debt ratio is 40.00%, then the equity multiplier is:
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Question

Quizplus · Accepted Answer

Equity multiplier = Total assets / Total equity
Since the debt ratio is 40.00%, this means that the total debt is 40.00% of total assets. Therefore, the total equity is 60.00% of total assets. 
Equity multiplier = Total assets / Total equity = 1 / (1 - debt ratio) = 1 / (1 - 0.40) = 1 / 0.60 = 1.67:1, which is choice B.

If the Debt Ratio Is 40