What is the debt ratio for a firm with an equity multiplier of 3.5?
A) 44.09%
B) 58.51%
C) 66.25%
D) 71.43%

Name: What is the debt ratio for a firm with an equity multiplier of 3.5? A) 44.09% B) 58.51% C) 66.25% D) 71.43%
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Question

Quizplus · Accepted Answer

The equity multiplier is the inverse of the equity ratio. If the equity multiplier is 3.5, the equity ratio is 1/3.5 = 0.2857. The debt ratio is 1 - equity ratio = 1 - 0.2857 = 0.7143 or 71.43%.

What Is the Debt Ratio for a Firm with an Equity