You are considering a stock investment in one of two firms (LotsofDebt, Inc. and LotsofEquity, Inc.), both of which operate in the same industry. LotsofDebt, Inc. finances its $50 million in assets with $40 million in debt and $10 million in equity. LotsofEquity, Inc. finances its $50 million in assets with $10 million in debt and $40 million in equity. What are the debt ratio, equity multiplier, and debt-to-equity ratio for the two firms?


A. LotsofDebt: 80%, 5 times, 4 times, respectively and LotsofEquity: 20%, 1.25 times, 25 times, respectively
B. LotsofDebt: 20%, 1.25 times, 25 times, respectively and LotsofEquity: 80%, 5 times, 4 times, respectively
C. LotsofDebt: 80%, 1.25 times, 25 times, respectively and LotsofEquity: 20%, 5 times, 4 times, respectively
D. LotsofDebt: 20%, 5 times, 4 times, respectively and LotsofEquity: 80%, 1.25 times, 25 times, respectively



Please help me. I do not understand for this question.


Thank you.:)

Debt ratio is debt/assets.
Equity multiplier is assets/equity.
Debt to equity is debt/equity.

Just some plug n chug.