Sara Lee Bakeries makes the chocolate brownie pieces used in Ben and Jerry\'s Ch

Question

Sara Lee Bakeries makes the chocolate brownie pieces used in Ben and Jerry's Chocolate Fudge Brownie ice-cream. 11,000 pounds of chocolate brownies were sold every day in 2011. This NJ based social venture had a total annual revenue of $2,244,971 in 2011. Its total expenses were $ 2,123,620 while the variable cost to produce the chocolate brownie pieces was $897,981.

If the total assets of Sara Lee Bakeries was $10,613,498 and the total liabilities were $699,210 then the equity balance for 2011 was?

Does the above equity balance indicate a high or low level of financial vulnerability? Please explain.

Please show each step manually or on a Excel spreadsheet

Explanation / Answer

Total assets=Total liabilities+Equity

Hence, Equity=Total Assets-Total Liabilities=10613498-699210=9914288

Financial Multiplier=Total Assets/Total Equity=10613498/9914288=1.07

So, this is low level of financial vulnerability as low debt

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