Zombie Corp. has a profit margin of 5.1 percent, a total asset turnover of 1.95, and ROE of 16.15 percent.

What is this firm's equity multiplier?

What is this firm's debt-equity ratio?

This firm's equity multiplier is 1.6239

This firm's debt-equity ratio is 0.6239

Explanation:

According to the given data we have the following:

Profit Margin (PM) = 5.10%

That is, Net Profit/Sales = 5.10% = 0.051

Total Assets Turnover (TAT) = 1.95

That is, Sales/Total Assets = 1.95

Return on Equity (ROE) = 16.15%

That is, Net Profit/Total Equity = 16.15% = 0.1615

In order to calculate this firm's equity multiplier we would have to use the following formula:

Equity Multiplier (EM) = Total Assets / Total Equity

= (total assets/sales) * (sales/total equity)

= (total assets/sales) * (sales/net profit) * (net profit/total equity)

= (1/T AT) * (1/PM) * (ROE)

= (1/1.95) * (1/0.051) * (0.1615)

=1.6239

This firm's equity multiplier is 1.6239

In order to calculate this this firm's debt-equity ratio we would have to use the following formula:

Debt Equity Ratio = Debt/Equity

= (total assets - total equity) / (total equity)

= (total assets/total equity) - (total equity/total equity)

= equity multiplier-1

=1.6239-1

=0.6239

This firm's debt-equity ratio is 0.6239