Homework SourseMarkus Companys common stock sold for 225 per share at the e
Markus Company’s common stock sold for $2.25 per share at the end of this year. The company paid a common stock dividend of $0.45 per share this year. It also provided the following data excerpts from this year’s financial statements:
15. What is the equity multiplier? (Round your answer to 2 decimal places.)
11. What is the company’s operating cycle? (Round your intermediate and final answers to 2 decimal places.)
| Ending Balance | Beginning Balance | |||
| Cash | $ | 29,000 | $ | 44,800 |
| Accounts receivable | $ | 50,000 | $ | 43,800 |
| Inventory | $ | 48,100 | $ | 50,000 |
| Current assets | $ | 127,100 | $ | 138,600 |
| Total assets | $ | 375,000 | $ | 360,000 |
| Current liabilities | $ | 51,000 | $ | 36,000 |
| Total liabilities | $ | 100,000 | $ | 90,000 |
| Common stock, $1 par value | $ | 108,000 | $ | 108,000 |
| Total stockholders’ equity | $ | 275,000 | $ | 270,000 |
| Total liabilities and stockholders’ equity | $ | 375,000 | $ | 360,000 |
Solution
15. Equity multiplier = Average Total Assets / Average Stockholders equity
Average Total Assets = (Beginning Balance of Total Assets + Ending Balance of Total Assets )/2
= (360,000+375,000) /2
= 367,500
Average Stockholders equity= (Beginning Balance of Stockholders equity+ Ending Balance of Stockholders equity)/2
= (270,000+ 275,000)/2
= 272,500
Equity Multiplier = 367,500/272,500 = 1.35 (rounded off)
11. Operating Cycle= 365 * (Average Inventories/ Cost of Goods Sold) + 365 * (Average Accounts Receivable/Credit Sales)
Average Inventories= (Beginning Balance of Inventory+ Ending Balance of Inventory)/2
= (50,000+ 48,100)/2 = 49050
Average Accounts Receivable= (Beginning Balance of Accounts Receivable+ Ending Balance of Accounts Receivable)/2
= (43800+50000)/2 = 46900
Operating Cycle = 365 * (49050/31900) + 365 * (46900/550,000)
= 56.12 +31.12
= 87.24 days
