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You are considering a stock investment in one of two firms (LotsofDebt, Inc. and LotsofEquity, Inc.), both of which operate in the same industry. LotsofDebt, Inc. finances its $36.00 million in assets with $33.00 million in debt and $3.00 million in equity. LotsofEquity, Inc. finances its $36.00 million in assets with $3.00 million in debt and $33.00 million in equity.Calculate the debt ratio. (Round your answers to 2 decimal places.)LotsofDebt, Inc. = ___.__%LotsofEquity, Inc. = ___.__%Calculate the equity multiplier. (Round your answers to 2 decimal places.)LotsofDebt, Inc. =______ timesLotsofEquity, Inc. = ______ timesCalculate the debt-to-equity. (Round your answers to 2 decimal places.)LotsofDebt, Inc. =______ timesLotsofEquity, Inc. = ______ times

Question

You are considering a stock investment in one of two firms (LotsofDebt, Inc. and LotsofEquity, Inc.), both of which operate in the same industry. LotsofDebt, Inc. finances its $36.00 million in assets with $33.00 million in debt and $3.00 million in equity. LotsofEquity, Inc. finances its $36.00 million in assets with $3.00 million in debt and $33.00 million in equity.

  1. Calculate the debt ratio. (Round your answers to 2 decimal places.)

    • LotsofDebt, Inc. = ___.__%
    • LotsofEquity, Inc. = ___.__%
  2. Calculate the equity multiplier(Round your answers to 2 decimal places.)

    • LotsofDebt, Inc. =______ times
    • LotsofEquity, Inc. = ______ times
  3. Calculate the debt-to-equity(Round your answers to 2 decimal places.)

    • LotsofDebt, Inc. =______ times
    • LotsofEquity, Inc. = ______ times
  •  
check_circleAnswer
Step 1

Debt Ratio = Total debt (Liabilities) / Total asset

Equity Multiplier = Total...

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Financial Statement Analysis

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