question archive Glenboro Fire Prevention Corp
Glenboro Fire Prevention Corp
Subject:FinancePrice:2.86 Bought8
Glenboro Fire Prevention Corp. has a profit margin of 7.20%, total asset turnover of 1.90, and ROE of 18.67%. What is this firm's debt- equity ratio? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Debt-equity ratio
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First let us know equity multiplier:
Equity multiplier = ROE / (Profit margin * Total asset turnover)
here,
ROE =18.67%=>0.1867
profit margin =7.20%=>0.072
total asset turnover =1.90.
Equity multiplier = 0.1867 / (0.072*1.90)
=>1.36476608.
Debt to equity ratio = Equity multiplier - 1
=>1.36476608 -1
=>0.36476608.
=>0.36 (rounded to two decimals).
