The financial statements provided are as follows:
2023 Income Statement
Sales: $770,000
Cost of Goods Sold: $340,000
Depreciation Expense: $95,000
Earnings before Interest and Taxes: $335,000
Interest Expense: $19,800
Taxable income: $315,200
Tax Expense: $104,016
Net income: $211,184
Dividends Paid: $10,300
Retained Earnings: $200,884
Balance Sheet End of 2023 Beginning of 2023
Cash: $280,000
Accounts Receivable: $122,000
Inventory: $50,000
Net Fixed Assets: $22,300
Total Assets: $188,000
Accounts Payable: $119,000
Long-term Debt: $630,000
Common Stock: $514,116
Accumulated Retained Earnings: $375,000
Total Liabilities & Shareholders' Equity: $893,300
To calculate the firm's equity multiplier as of the end of 2023, we need to divide the Total Assets by the Total Liabilities & Shareholders' Equity.
Equity Multiplier = Total Assets / Total Liabilities & Shareholders' Equity
Equity Multiplier = $188,000 / $893,300
Equity Multiplier = 0.2107 (rounded to four decimal places)
Therefore, the firm's equity multiplier as of the end of 2023 is 0.21 (rounded to two decimal points).
