What is a firm\'s equity multiplier if its total assets are $274,000, equity is

Question

What is a firm's equity multiplier if its total assets are $274,000, equity is $64,000, current liabilities are $48,000, and long-term liabilities are $162,000? A. more than 4.26 B. more than 4.02 but less than 4.26 C. more than 3.78 but less than 4.02 D. more than 3.54 but less than 3.78 E. less than 3.54 9. 10. In 2015, Beautiful Beds had an ROE of 38.4% and equity multiplier equals 2.1. The firm had sales of $964,200 and net income of $180,525 in 2015. Using the DuPont method, what is the total asset turnover ratio? A. more than 1.45 B. more than 1.22 but less than 1.45 C. more than 1.09 but less than 1.22 D. more than 0.96 but less than 1.09 E. less than 0.96

Explanation / Answer

Answer 9 : Equity multiplier = Total assets/ Equity

Equity multiplier = $274000/$64000= 4.28

Option A is correct. As equity Multiplier is used to measure financial leverage of the company.

Answer 10 : ROE = Net profit margin* Asset turnover* Equity multiplier

38.4% = 18.72%* Asset turnover* 2.1

38.4= 39.312* Asset turnover

Asset turnover ratio = 38.4/39.312 = 0.9768

Option D is correct. Duo point measure three different component together to ascertian about the ability of asset turnover ratio.

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