Leverage ratio: Dreisen Traders has total debt of $1,233,837 and total assets of $2,178,990. What are the firm's equity multiplier and debt-to-equity ratio?(Round to nearest whole percent)

Question

Quizplus · Accepted Answer

Equity multiplier = Total assets / Total equity = Total assets / (Total assets - Total debt) = 2,178,990 / (2,178,990 - 1,233,837) = 2.31

Debt-to-equity ratio = Total debt / Total equity = 1,233,837 / (2,178,990 - 1,233,837) = 1.31

Rounding to the nearest whole percent, we get an equity multiplier of 2.31 and a debt-to-equity ratio of 1.31, which corresponds to choice A.

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