Use the following information to answer this question. Windswept, Inc. 2010 Inco
ID: 1171999 • Letter: U
Question
Use the following information to answer this question.
Windswept, Inc. 2010 Income Statement ($ in millions)
Net sales $ 9,000
Less: Cost of goods sold 7,350
Less: Depreciation 360
Earnings before interest and taxes $ 1,290
Less: Interest paid 87
Taxable Income $ 1,203
Less: Taxes 421
Net income $ 782
Windswept, Inc. 2009 and 2010 Balance Sheets ($ in millions)
2009 2010 2009 2010
Cash $ 160 $ 190 Accounts payable $ 1,150 $ 1,332
Accounts rec. 840 740 Long-term debt 1,000 1,233
Inventory 1,570 1,565 Common stock $ 3,190 $ 2,910
Total $ 2,570 $ 2,495 Retained earnings 470 720
Net fixed assets 3,240 3,700
Total assets $ 5,810 $ 6,195 Total liab. & equity $ 5,810 $ 6,195
What is the equity multiplier for 2010?
Explanation / Answer
Equity multiplier = Total assets/ Total equity
Total assets in 2010 = $6,195 millions
Total equity in 2010 = Common stock + Retained earnings
= 2,910 + 720
= $3,630
Equity multiplier = Total assets/ Total equity
= 6,195 / 3,630
= 1.71