Leverage ratio: Dreisen Traders has total debt of $1,233,837 and total assets of $2,178,990. What are the company's equity multiplier and debt-to-equity ratio?
A) 2.31; 1.31
B) 1.75; 0.75
C) 0.75; 1.75
D) 1.31; 2.31

Question

Quizplus · Accepted Answer

The equity multiplier is calculated as total assets divided by total equity. The debt-to-equity ratio is calculated as total debt divided by total equity. In this case, the equity multiplier is 2.178,990 / (2,178,990 - 1,233,837) = 2.31 and the debt-to-equity ratio is 1,233,837 / (2,178,990 - 1,233,837) = 1.31.

Leverage Ratio: Dreisen Traders Has Total Debt of $1,233,837 and Total