Question

jones manufacturing has current assets of $26,900, net working capital of 8,200 long-term debt of 21, 500 and total equity of 57,800 what is the equity multiplier?

Answer 1

1.7

Step-by-step explanation:

The computation of the equity multiplier is shown below:

As we know that

Net working capital = current assets - current liabilities

So,

current liabilities is

= $26,900 - $8,200

= $18,700

And,

Total liabilities = current liabilities + long term debt

= $18,700 + $21,500

= $40,200

Now

Total assets = Total liabilities + Total equity

= $40,200 + $57,800

= $98,000

Now

Equity multiplier is

= Total assets ÷ equity

= $98,000 ÷ 57800

= 1.7