Homework SourseMarkus Companys common stock sold for 275 per share at the e
Markus Company’s common stock sold for $2.75 per share at the end of this year. The company paid a common stock dividend of $0.55 per share this year. It also provided the following data excerpts from this year’s financial statements:
15. What is the equity multiplier?
| Ending Balance | Beginning Balance | |||
| Cash | $ | 35,000 | $ | 30,000 |
| Accounts receivable | $ | 60,000 | $ | 50,000 |
| Inventory | $ | 55,000 | $ | 60,000 |
| Current assets | $ | 150,000 | $ | 140,000 |
| Total assets | $ | 450,000 | $ | 460,000 |
| Current liabilities | $ | 60,000 | $ | 40,000 |
| Total liabilities | $ | 130,000 | $ | 120,000 |
| Common stock, $1 par value | $ | 120,000 | $ | 120,000 |
| Total stockholders’ equity | $ | 320,000 | $ | 340,000 |
| Total liabilities and stockholders’ equity | $ | 450,000 | $ | 460,000 |
Solution
Average Stockholders’ Equity = (Beginning Stockholders’ Equity + Ending Stockholders’ Equity) / 2
Average Stockholders’ Equity = ($320,000 + $340,000) / 2
Average Stockholders’ Equity = $330,000
Equity Multiplier = Ending Total Assets / Average Stockholders’ Equity
Equity Multiplier = $450,000 / $330,000
Equity Multiplier = 1.36
