Question

Parsa’s organics currently has $56 in debt for every $100 in equity. If the company were to use some of its cash to decrease its debt, while maintaining its current equity and net income, which one of the following would decrease?.

Answer 1

If Persa's Organics was to use cash to decrease debt, the figure that would decrease is E. Equity Multiplier.

Why would the equity multiplier decrease?

The Equity multiplier is calculated as:

= Total assets / Shareholder's equity

Total assets will decrease because cash is decreasing from being used to pay off debt. Shareholder's equity is remaining the same on the other hand. This would therefore lead to the whole measure decreasing.

Options include:

a. Total asset turnover

b. Return on equity

c. Return on assets

d. Net profit margin

e. Equity multiplier

Find out more on equity multiplier at https://brainly.com/question/14888197.

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