Question

Use the following information to answer this question. Bayside, Inc. 2010 Income Statement ($ in thousands)Net sales $ 6,020Less: Cost of goods sold 4,240Less: Depreciation 325Earnings before interest and taxes $ 1,455Less: Interest paid 29Taxable Income $ 1,426Less: Taxes 499Net income $ 927Bayside, Inc. 2009 and 2010 Balance Sheets ($ in thousands) 2009201020092010Cash $ 80 $ 185 Accounts payable $ 1,445 $ 1,745Accounts rec. 940 780 Long-term debt 760 550Inventory 1,5602,010Common stock $ 3,125 $ 3,020Total $ 2,580 $ 2,975 Retained earnings 8201,070Net fixed assets 3,5703,410Total assets $ 6,150$ 6,385Total liab. & equity $ 6,150$ 6,385What is the equity multiplier for 2010?0.522.112.041.041.56

Answer 1

1.56

Step-by-step explanation:

Return on equity(ROE) is the achievement of company in generating profits for the common stockholders. It is computed by dividing the net income excluding preferred dividend with average outstanding common stockholder's equity

Equity multiplier = Total assets / Total equity

Total asset = $6385

Total Equity= Common stock + Retained earning at end

Total Equity = $3,020 + $1,070

Total Equity= $4,090

Equity Multiplier= $6,385 / ( $4,090)

= $1.56