(DuPont analysis) Garwryk, Inc., which is financed with debt and equity, presently has a debt ratio of percent. What is the firm's equity multi plier? How is the equity multiplier related to the firm's use of debt financing (i.e., if the firm increased its use of debt financing would this increase or decrease its equity multi plier)? Explain. What is the firm's equity multiplier? The equity multiplier is given by: The equity multiplier is. (Round to two decimal places.) 1 Equity Multiplier =7 1- Debt Ratio How is the equity multiplier related to the firm's use of debt nnancıng (1.e., It the nrm increased its use of debt financing would this increase or decrease its equity multi plier)? Explain. (Select the best choice below.) A. If the company decreases its debt financing it willincreaseits debt ratio, therefore it will increase its equity multiplier. B. If the company increases its debt financing it will increase its debt ratio, therefore it will decrease its equity multiplier. C. If the company increases its debt financing it will decrease its debt ratio, therefore it willdecreaseits equity multiplier. D. If the company increases its debt financing it will increase its debt ratio, therefore it will increase its equity multiplier.
(DuPont analysis) Garwryk, Inc., which is financed with debt and equity, presently has a debt ratio of percent. What is the firm's equity multi plier? How is the equity multiplier related to the firm's use of debt financing (i.e., if the firm increased its use of debt financing would this increase or decrease its equity multi plier)? Explain. What is the firm's equity multiplier? The equity multiplier is given by: The equity multiplier is. (Round to two decimal places.) 1 Equity Multiplier =7 1- Debt Ratio How is the equity multiplier related to the firm's use of debt nnancıng (1.e., It the nrm increased its use of debt financing would this increase or decrease its equity multi plier)? Explain. (Select the best choice below.) A. If the company decreases its debt financing it willincreaseits debt ratio, therefore it will increase its equity multiplier. B. If the company increases its debt financing it will increase its debt ratio, therefore it will decrease its equity multiplier. C. If the company increases its debt financing it will decrease its debt ratio, therefore it willdecreaseits equity multiplier. D. If the company increases its debt financing it will increase its debt ratio, therefore it will increase its equity multiplier.
Chapter3: Evaluation Of Financial Performance
Section: Chapter Questions
Problem 1P
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