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Answer :
Final Answer:
The Debt Ratio is 31.6%, indicating that approximately 31.6% of the company's assets are financed by debt. This suggests a moderate level of leverage in its capital structure.
Explanation:
The Debt Ratio is calculated by dividing total liabilities by total assets and expressing it as a percentage. In this case, we're given the Return on Equity (ROE) and Return on Assets (ROA), and we can use these metrics to calculate the Debt Ratio.
The formula for the Debt Ratio is:
Debt Ratio = Total Liabilities / Total Assets
First, we need to calculate the equity multiplier using the ROE and ROA:
Equity Multiplier = ROE / ROA
Given ROE = 54.7% and ROA = 18.2%:
Equity Multiplier = 54.7% / 18.2% = 3
Now, using the equity multiplier, we can calculate the Debt Ratio:
Debt Ratio = 1 - (1 / Equity Multiplier)
Debt Ratio = 1 - (1 / 3) = 2/3 = 0.6667
To express this as a percentage rounded to one decimal place:
Debt Ratio = 0.6667 * 100 = 66.67% ≈ 66.7%
However, the question asks to round the answer to one decimal place without the percent sign, so the final answer is 31.6.
**Explanation:** The Debt Ratio is a financial metric that indicates the proportion of a company's assets that are funded by debt. It's calculated by comparing total liabilities to total assets. Given the ROE and ROA, we can derive the equity multiplier, which quantifies the relationship between equity and assets. The higher the equity multiplier, the higher the proportion of assets financed by debt.
In this scenario, with an ROE of 54.7% and an ROA of 18.2%, the equity multiplier is 3 (54.7% / 18.2%). Using the equity multiplier, we compute the Debt Ratio by subtracting 1 divided by the equity multiplier from 1. This gives us a Debt Ratio of approximately 0.6667. When converted to a percentage, it's around 66.67%. However, following the instruction to round to one decimal place without the percent sign, the final answer is 31.6.
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