Asked by Yassine Wydadi on Apr 28, 2024
Verified
The company's equity multiplier at the end of Year 2 is closest to:
A) 0.28
B) 1.28
C) 3.53
D) 0.78
Equity Multiplier
A financial ratio that measures a company's leverage, calculated as total assets divided by total equity.
Year 2
The second year in a given time frame or series, often referring to fiscal or calendar years.
- Analyze the equity multiplier to gain insight into the extent of financial leverage.
Verified Answer
KR
Kaylin RicciMay 03, 2024
Final Answer :
B
Explanation :
Equity multiplier = Average total assets* ÷ Average stockholders' equity*
= $1,652,500 ÷ $1,292,500 = 1.28 (rounded)
*Average total assets = ($1,675,000 + $1,630,000)÷ 2 = $1,652,500
**Average stockholders' equity = ($1,305,000 + $1,280,000)÷ 2 = $1,292,500
Reference: CH14-Ref13
Burdick Corporation has provided the following financial data from its balance sheet:
Sales (all on account)in Year 2 amounted to $1,410,000 and the cost of goods sold was $860,000.
= $1,652,500 ÷ $1,292,500 = 1.28 (rounded)
*Average total assets = ($1,675,000 + $1,630,000)÷ 2 = $1,652,500
**Average stockholders' equity = ($1,305,000 + $1,280,000)÷ 2 = $1,292,500
Reference: CH14-Ref13
Burdick Corporation has provided the following financial data from its balance sheet:
Sales (all on account)in Year 2 amounted to $1,410,000 and the cost of goods sold was $860,000.
Learning Objectives
- Analyze the equity multiplier to gain insight into the extent of financial leverage.
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