Jack Corp. has a profit margin of 9.70 percent, total asset turnover of 1.37, and ROE...

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Jack Corp. has a profit margin of 9.70 percent, total asset turnover of 1.37, and ROE of 18.62 percent. What is the firm's debt-equity ratio?

Answer 1

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Answer #1

ROE=profit margin*Total asset turnover*equity multiplier

18.62=(9.7*1.37*equity multiplier)

equity multiplier=18.62/(9.7*1.37)

=1.40115885

equity multiplier=Total assets/equity

Total assets=1.40115885 equity

Total assets=debt+equity

debt=1.40115885 equity-equity

=0.40115885 equity

Hence debt-equity ratio=debt/equity

=0.4012(Approx).

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Answer 2

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