Answer:
0.20
Explanation:
Given that,
Profit margin = 10.70 percent
Total asset turnover = 1.45
ROE = 18.61 percent
ROE = Profit margin × Total asset turnover × Equity multiplier
0.1861 = 0.1070 × 1.45 × Equity multiplier
0.1861 ÷ (0.1070 × 1.45) = Equity multiplier
0.1861 ÷ 0.15515 = Equity multiplier
1.20 = Equity multiplier
Equity multiplier = 1 + (debt ÷ equity)
1.20 - 1 = debt-equity ratio
0.20 = debt-equity ratio
Therefore, the firm's debt-equity ratio is 0.20.
