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27 October, 00:41

Fincher, Inc., has a total debt ratio of. 64.

1. What is its debt-equity ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.)

2. What is its equity multiplier? (Do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.)

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  1. 27 October, 02:47
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    1. Debt-equity ratio = 1.78

    2. Equity multiplier = 2.78

    Explanation:

    Total Debt Ratio = 0.64

    Total Debt Ratio = Total Debt / Total Asset

    0.64 = Total Debt / Total Asset

    Considering asset = 1

    0.64 = Total Debt / 1

    Total Debt = 0.64 x 1

    Total Debt = 0.64

    According Accounting Equation

    Assets = Equity + Liabilities

    Equity = Assets - Liabilities

    Equity = 1 - 0.64

    Equity = 0.36

    Now Calculate Debt equity ratio

    Debt Equity Ratio = Total Debt / Total Equity

    Debt Equity Ratio = 0.64 / 0.36

    Debt Equity Ratio = 1.78 = 178%

    Equity Multiplier = Total Asset / Total Equity

    Equity Multiplier = 1 / 0.36 = 2.78 = 278%
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