Jiminy Cricket Removal has a profit margin of 8 percent, total asset turnover of 1.12, and ROE of 14.34 percent. Required: What is this firm’s debt-equity ratio? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Debt-equity ratio times Explanation: We can use the Du Pont identity and solve for the equity multiplier. With the equity multiplier we can find the debt-equity ratio. Doing so we find: ROE = (Profit margin)(Total asset turnover)(Equity multiplier) .1434 = (0.08)(1.12)(Equity multiplier) Equity multiplier = 1.60 Now, using the equation for the equity multiplier, we get: Equity multiplier = 1 + Debt-equity ratio 1.60 = 1 + Debt-equity ratio Debt-equity ratio = .60

Jiminy Cricket Removal has a profit margin of 8 percent, total asset turnover of 1.12, and ROE of 14.34 percent.

Required:

What is this firm’s debt-equity ratio? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Debt-equity ratio

times

Explanation:

We can use the Du Pont identity and solve for the equity multiplier. With the equity multiplier we can find the debt-equity ratio. Doing so we find:

ROE = (Profit margin)(Total asset turnover)(Equity multiplier)

.1434 = (0.08)(1.12)(Equity multiplier)

Equity multiplier = 1.60

Now, using the equation for the equity multiplier, we get:

Equity multiplier = 1 + Debt-equity ratio

1.60 = 1 + Debt-equity ratio

Debt-equity ratio = .60