Deacon Corporation has provided the following financial data from its balance sheet and income statement:

-The company's equity multiplier at the end of Year 2 is closest to:
A) 0.64
B) 1.65
C) 1.57
D) 0.61

Question

Deacon Corporation has provided the following financial data from its balance sheet and income statement:
 
-The company's equity multiplier at the end of Year 2 is closest to:
A) 0.64 
B) 1.65 
C) 1.57 
D) 0.61

Quizplus · Accepted Answer

Equity multiplier = Average total assets* ÷ Average stockholders' equity*
= $1,179,000 ÷ $716,000 = 1.65 (rounded)
*Average total assets = ($1,198,000 + $1,160,000) ÷ 2 = $1,179,000
**Average stockholders' equity = ($732,000 + $700,000) ÷ 2 = $716,000

Deacon Corporation Has Provided the Following Financial Data from Its