Klein Corporation has provided the following data: The company's equity multiplier is closest to:
A)1.24
B)0.56
C)1.80
D)0.81

Question

Klein Corporation has provided the following data:  The company's equity multiplier is closest to:
A)1.24 
B)0.56 
C)1.80 
D)0.81

Quizplus · Accepted Answer

The equity multiplier formula is:
Equity Multiplier = Total Assets / Total Equity
Using the given data, we can calculate the equity multiplier as follows:
Equity Multiplier = 1,610,000 / 894,000 = 1.80
Therefore, the closest choice is C. Equity multiplier = Average total assets* ÷ Average stockholders' equity*
= $1,323,500 ÷ $734,500 = 1.80 (rounded)
*Average total assets = ($1,337,000 + $1,310,000)÷ 2 = $1,323,500
**Average stockholders' equity = ($739,000 + $730,000)÷ 2 = $734,500

Klein Corporation Has Provided the Following Data: the Company's