Question

03.05 Calculating Leverage Ratios Fincher, Inc., has a total debt ratio of .19. What is its debt–equity ratio? What is its equity multiplier?
Total Debt Ratio	0.19
Debt-Equity Ratio
Equity Multiplier

03.07 DuPont Identity If jPhone, Inc., has an equity multiplier of 1.83, total asset turnover of 1.65, and a profit margin of 5.2 percent, what is its ROE?
Equity Multiplier	1.83
Total Asset Turnover	1.65
Profit Margin	5.20%
ROE

Answer 1

1.Total debt ratio=Total debt/Total assets

Total debt=0.19*Total assets

Total assets=debt+equity

equity=Total assets-0.19Total assets

=0.81*Total assets

Debt-equity ratio=(0.19*Total assets)/(0.81*Total assets)

=0.23(Approx)

Equity multiplier=Total assets/equity

=Total assets/(0.81*Total assets)

=1.23(Approx)

2.ROE=Profit margin*Total asset turnover*Equity multiplier

=1.83*1.65*5.2

=15.7014%