Question

In: Finance

Equity Multiplier (EM) is calculated by Dividing Total Assets bt the Total Equity of the Firm....

Equity Multiplier (EM) is calculated by Dividing Total Assets bt the Total Equity of the Firm.

This Ratio is called EM, Because:

There is no Reason to call it Equity Multiplier (EM) - It just shows the Total Assets in $ are so many times the Total Amount of Equity in $ (TE) of the Firm.

When we Multiply by the Total Asset Turnover  (TATO  of the Firm, we get Return on Equity (ROE)

When we Multiply by the Profit Margin (PM)  of the Firm, we get Return on Equity (ROE)

When we Multiply by the Return on Assets (ROA) of the Firm. we get Return on Equity (ROE)

When we Multiply by the Gross Margin (GM)  of the Firm, we get Return on Equity (ROE)

Solutions

Expert Solution

When we will be multiplying the the return on Assets of the company by equity multiplier of the company then we will be getting the return on equity because return on asset has already been calculated upon the total turnover of the Asset.

All the other statements are false

Correct answer will be option ( D) When we will be multiplying the return on asset of the firm, we get return on equity.

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

QUESTION: The financial leverage multiplier is the ratio of the firm's total assets to stockholders' equity....
QUESTION: The financial leverage multiplier is the ratio of the firm's total assets to stockholders' equity. ANSWER OPTIONS: True False Please specifically state IN THE SUBJECT LINE if the answer is TRUE or FALSE. Further, discussions should not simply be a restatement of other comments made by students who have previously posted. It is also important to know that if students include the question in their answer response, they should be aware that said text will NOT be included in...
QUESTION: The financial leverage multiplier is the ratio of the firm's total assets to stockholders' equity....
QUESTION: The financial leverage multiplier is the ratio of the firm's total assets to stockholders' equity. ANSWER OPTIONS: True False You need to specifically state IN THE SUBJECT LINE if the answer is TRUE or FALSE. EXAMPLES OF INADEQUATE RESPONSES: “I think the answer is False.” OR “The correct answer is “C.” Postings must be no less than 200 words in length to be considered. Any posting less than 200 words in length will not be reviewed.
Last year Blease Inc had a total assets turnover of 1.33 and an equity multiplier of...
Last year Blease Inc had a total assets turnover of 1.33 and an equity multiplier of 1.75. Its sales were $355,000 and its net income was $10,600. The firm finances using only debt and common equity, and its total assets equal total invested capital. The CFO believes that the company could have operated more efficiently, lowered its costs, and increased its net income by $10,250 without changing its sales, assets, or capital structure. Had it cut costs and increased its...
Acme Inc had a total assets turnover of 1.39 and an equity multiplier of 1.75. Although...
Acme Inc had a total assets turnover of 1.39 and an equity multiplier of 1.75. Although it had net income of $11,000 on $295,000 of sales, a private equity firm thinks it could have had a net income $10,750 greater just by cutting costs. If this is possible, how much greater would be the return on equity? (Hint: DuPont!) 8.47% 8.86% 8.09% 9.27% 8.82%
Last year Blease Inc had a total assets turnover of 1.33 and an equity multiplier of...
Last year Blease Inc had a total assets turnover of 1.33 and an equity multiplier of 1.75. Its sales were $205,000 and its net income was $10,600. The firm finances using only debt and common equity and its total assets equal total invested capital. The CFO believes that the company could have operated more efficiently, lowered its costs, and increased its net income by $10,250 without changing its sales, assets, or capital structure. Had it cut costs and increased its...
Last year Mason Inc. had a total assets turnover of 1.33 and an equity multiplier of...
Last year Mason Inc. had a total assets turnover of 1.33 and an equity multiplier of 1.75. Its sales were $150,000 and its net income was $10,549. The CFO believes that the company could have operated more efficiently, lowered its costs, and increased its net income by $5,250 without changing its sales, assets, or capital structure. Had it cut costs and increased its net income in this amount, by how much would the ROE have changed? Select the correct answer....
A firm has a profit margin of 2% and an equity multiplier of 2.9. Its sales are $200 million, and it has total assets of $120 million.
4. A firm has a profit margin of 2% and an equity multiplier of 2.9. Its sales are $200 million, and it has total assets of $120 million. What is its ROE? Do not round intermediate calculations. Round your answer to two decimal places.  
Firm C has Total Assets of $ 4,000,000. The firm’s Owners Equity at the beginning of...
Firm C has Total Assets of $ 4,000,000. The firm’s Owners Equity at the beginning of the year was $2,800,000. The firm’s Net Income for the year was $ 400,000 and Dividends totaled $ 200,000… There was no Owners Investment for the year. Assuming that this information was for year ended 12/31/2007, please present the firm’s Statement of Owners Equity.
a firm has total assets of $79,600, cash of $25,000 and a debt-equity ratio of 0.25....
a firm has total assets of $79,600, cash of $25,000 and a debt-equity ratio of 0.25. What is the equity multiplier?
Brown and Co. has a return on assets of 14 percent, an equity multiplier of 1.8,...
Brown and Co. has a return on assets of 14 percent, an equity multiplier of 1.8, and a dividend payout ratio of 40 percent. What is the firm’s internal rate of growth? 9.17% None of the above 5.93% 7.80% 7.68%
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT