Firm A and Firm B have debt-total asset ratios of 30% and 20% and returns on total assets of 8% and 14%, respectively. What is the return on equity for Firm A and Firm B?
Added by Dale C.
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The equity multiplier is the ratio of total assets to equity. We can calculate it using the following formula: Equity multiplier = Total assets / Equity For firm A, the debt-to-total asset ratio is 30%, which means that the equity-to-total asset ratio is 70%. Show more…
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