Question

The amount of assets per dollar of equity capital is called the Question 9 options: A) equity ratio. B) equity multiplier. C) asset ratio. D) asset multiplier.

Answer 1

The correct answer is letter "B": equity multiplier.

Step-by-step explanation:

The Equity Multiplier is a simple proportion used to calculate the financial leverage of the company. The Equity Multiplier ratio is calculated by dividing the total assets by total equity. When the company purchases major assets it can fund such acquisitions through debt or stock issuance. A high Equity Multiplier indicates that the company used more debt than equity to finance its purchases of assets.