Windswept, Inc. 2010 Income Statement ($ in millions) Net sales $ 9,900 Less: Co

Question

Windswept, Inc. 2010 Income Statement ($ in millions) Net sales $ 9,900 Less: Cost of goods sold 7,650 Less: Depreciation 390 Earnings before interest and taxes $ 1,860 Less: Interest paid 88 Taxable Income $ 1,772 Less: Taxes 620 Net income $ 1,152 Windswept, Inc. 2009 and 2010 Balance Sheets ($ in millions) 2009 2010 2009 2010 Cash $ 220 $ 250 Accounts payable $ 1,540 $ 1,632 Accounts rec. 990 890 Long-term debt 1,010 1,293 Inventory 1,750 1,655 Common stock $ 3,240 $ 2,970 Total $ 2,960 $ 2,795 Retained earnings 530 780 Net fixed assets 3,360 3,880 Total assets $ 6,320 $ 6,675 Total liab. & equity $ 6,320 $ 6,675

What is the equity multiplier for 2010?

2.64

1.31

2.25

3.33

1.78

Explanation / Answer

Equity multiplier = Total assets / Stockholders Equity

= 6675 / (2970+780)

= 6675/3750

= 1.78

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