What Is the Debt Ratio for a Firm with an Equity

question 6

Multiple Choice

What is the debt ratio for a firm with an equity multiplier of 3.5?

• A) 44.09 percent
• B) 58.51 percent
• C) 66.25 percent
• D) 71.43 percent

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Definitions:

Retained Earnings

Profits that a company retains for reinvestment rather than distributing to shareholders as dividends.

Dividends Payable

A liability account on a company’s balance sheet indicating the amount owed to shareholders in the form of dividends to be paid out.

Stock Split

A corporate action that increases the number of a corporation's outstanding shares by dividing each share, which may lower the share price.

Par Value

The nominal or face value of a stock or bond, as stated in the corporate charter or on the certificate.