ou are considering a stock investment in one of two firms (LotsofDebt, Inc. and
ID: 2733837 • Letter: O
Question
ou are considering a stock investment in one of two firms (LotsofDebt, Inc. and LotsofEquity, Inc.), both of which operate in the same industry. LotsofDebt, Inc. finances its $38.00 million in assets with $33.75 million in debt and $4.25 million in equity. LotsofEquity, Inc. finances its $38.00 million in assets with $4.25 million in debt and $33.75 million in equity.
Calculate the debt ratio. (Round your answers to 2 decimal places.)
ou are considering a stock investment in one of two firms (LotsofDebt, Inc. and LotsofEquity, Inc.), both of which operate in the same industry. LotsofDebt, Inc. finances its $38.00 million in assets with $33.75 million in debt and $4.25 million in equity. LotsofEquity, Inc. finances its $38.00 million in assets with $4.25 million in debt and $33.75 million in equity.
Explanation / Answer
Answer 1 ($ in Millions) LotsofDebt, Inc LotsofEquity, Inc Total Debt (A) 33.75 4.25 Total Assets (B) 38 38 Debt ratio ( A / B ) 88.82% 11.18% Answer 2 LotsofDebt, Inc LotsofEquity, Inc Total Assets (A) 38 38 Total Equity (B) 4.25 33.75 Equity Multiplier ( A / B ) 8.94 1.13 Answer 3 LotsofDebt, Inc LotsofEquity, Inc Total Debt (A) 33.75 4.25 Total Equity (B) 4.25 33.75 Debt to Equity ratio ( A / B ) 7.94 0.13
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