Precision Tool 2009 Income Statement ($ in millions) Net sales $8,500 Less: Cost

Question

Precision Tool
2009 Income Statement
($ in millions)
Net sales $8,500
Less: Cost of goods sold 7,240
Less: Depreciation 410
Earnings before interest and taxes 850
Less: Interest paid 87
Taxable Income 763
Less: Taxes 267
Net income $ 496

Precision Tool
2008 and 2009 Balance Sheets
($ in millions)
2008 2009 2008 2009
Cash $ 130 $ 160 Accounts payable $1,120 $1,140
Accounts rec. 950 770 Long-term debt 1,050 1,285
Inventory 1,480 1,520 Common stock $3,140 $2,940
Total $2,560 $2,450 Retained earnings 500 695
Net fixed assets 3,250 3,610
Total assets $5,810 $6,060 Total liab. & equity $5,810 $6,060

What is the equity multiplier for 2009?

Explanation / Answer

equity multiplier = assets/equity assets in 2009 = 6060 equity in 2009 = common stock in 2009 + retained earnings in 2009 = 2940 + 695 = 3635 equity multiplier = 6060/3635 = 1.66712517 Please rate my answer and appreciate my time spent :) thanks in advance!

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