contestada

Jensen shipping has total assets of $694,800 at year's end. The beginning owners' equity was $362,400. During the year, the company had sales of $711,000, a profit margin of 5.2 percent, a tax rate of 21 percent, and paid $12,500 in dividends. What is the equity multiplier at year-end

Respuesta :

Answer: Jensen shipping's equity multiplier at year-end is 1.80

We arrive at the answer as follows:

Sales                                    $711,000

Profit Margin                         5.2% of sales

Since Profit margin generally refers to net profit margin after tax, we don't consider the tax values in the question.

Net Profit in $                                      [tex]36972 (0.052 * 711,000)[/tex]

less: Dividends                                           -12,500

Additions to Retained Earnings                24472

Add: Beginning Owner's Equity                362400  

Ending Owner's Equity                              386872

The formula for Equity Multiplier is :

[tex]Equity Multiplier = \frac{Total Assets}{Ending Shareholder's equity}[/tex]

Plugging in the values we get,

[tex]Equity Multiplier = \frac{694800}{386872}[/tex]

[tex]Equity Multiplier = 1.795942844 [/tex]

Otras preguntas