Perry, Inc., has a total debt ratio of 0.38. What is its debt–equity ratio? (Round your answer to 2 decimal places. (e.g., 32.16)) Debt–equity ratio What is its equity multiplier? (Round your answer to 2 decimal places. (e.g., 32.16)) Equity multiplier Explanation: Total debt ratio = 0.38 = TD / TA Substituting total debt plus total equity for total assets, we get: 0.38 = TD / (TD + TE) Solving this equation yields: 0.38(TE) = 0.62(TD) Debt/equity ratio = TD / TE = 0.38 / 0.62 = 0.61 Equity multiplier = 1 + D/E = 1.61

Perry, Inc., has a total debt ratio of 0.38. What is its debt–equity ratio? (Round your answer to 2 decimal places. (e.g., 32.16))

Debt–equity ratio

What is its equity multiplier? (Round your answer to 2 decimal places. (e.g., 32.16))

  

Equity multiplier

Explanation:

Total debt ratio = 0.38 = TD / TA

  

Substituting total debt plus total equity for total assets, we get:

  

0.38 = TD / (TD + TE)

  

Solving this equation yields:

  

0.38(TE) = 0.62(TD)

  

Debt/equity ratio = TD / TE = 0.38 / 0.62 = 0.61

  

Equity multiplier = 1 + D/E = 1.61