Use the following information to answer this question Baysid

Use the following information to answer this question. Bayside, Inc. 2010 Income Statement ($ in thousands) Net sales $ 5,820 Less: Cost of goods sold 4,140 Less: Depreciation 315 Earnings before interest and taxes $ 1,365 Less: Interest paid 25 Taxable Income $ 1,340 Less: Taxes 469 Net income $ 871 Bayside, Inc. 2009 and 2010 Balance Sheets ($ in thousands) 2009 2010 2009 2010 Cash $ 70 $ 175 Accounts payable $ 1,395 $ 1,725 Accounts rec. 900 740 Long-term debt 740 530 Inventory 1,520 1,990 Common stock $ 3,085 $ 3,000 Total $ 2,490 $ 2,905 Retained earnings 800 1,000 Net fixed assets 3,530 3,350 Total assets $ 6,020 $ 6,255 Total liab. & equity $ 6,020 $ 6,255 What is the equity multiplier for 2010? 1.56 2.02 0.51 2.09 1.03

Solution

Equity multipier = Total asset /share holder equity

for 2010 Total asset = $6255 and common stock = $3000

so equity mulitiplier= 6255/3000=2.09