Asked by Kendrick Brown Jr. on Jun 19, 2024
Verified
Klein Corporation has provided the following data: 
The company's equity multiplier is closest to:
A) 1.24
B) 0.56
C) 1.80
D) 0.81
Equity Multiplier
A financial leverage ratio that measures the portion of a company’s assets that are financed by shareholders' equity, indicating the level of debt used to finance assets.
Provided Data
Information or statistics supplied for analysis, typically used as a basis for decision-making or calculation in various fields.
- Execute the computation and analysis of equity multipliers.
Verified Answer
KP
Keisha PryceJun 21, 2024
Final Answer :
C
Explanation :
The equity multiplier formula is:
Equity Multiplier = Total Assets / Total Equity
Using the given data, we can calculate the equity multiplier as follows:
Equity Multiplier = 1,610,000 / 894,000 = 1.80
Therefore, the closest choice is C.
Equity Multiplier = Total Assets / Total Equity
Using the given data, we can calculate the equity multiplier as follows:
Equity Multiplier = 1,610,000 / 894,000 = 1.80
Therefore, the closest choice is C.
Explanation :
Equity multiplier = Average total assets* ÷ Average stockholders' equity*
= $1,323,500 ÷ $734,500 = 1.80 (rounded)
*Average total assets = ($1,337,000 + $1,310,000)÷ 2 = $1,323,500
**Average stockholders' equity = ($739,000 + $730,000)÷ 2 = $734,500
= $1,323,500 ÷ $734,500 = 1.80 (rounded)
*Average total assets = ($1,337,000 + $1,310,000)÷ 2 = $1,323,500
**Average stockholders' equity = ($739,000 + $730,000)÷ 2 = $734,500
Learning Objectives
- Execute the computation and analysis of equity multipliers.
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