Use the following information to answer this question. Bayside, Inc. 2010 Income Statement ($ in thousands)
Net sales $ 6,020
Less: Cost of goods sold 4,240
Less: Depreciation 325
Earnings before interest and taxes $ 1,455
Less: Interest paid 29
Taxable Income $ 1,426
Less: Taxes 499
Net income $ 927
Bayside, Inc. 2009 and 2010 Balance Sheets ($ in thousands)
2009 2010 2009 2010
Cash $ 80 $ 185 Accounts payable $ 1,445 $ 1,745
Accounts rec 940 780 Long-term debt 760 550
Inventory 1,560 2,010 Common stock $ 3,125 $ 3,020
Total $ 2,580 $ 2,975 Retained earnings 820 1,070
Net fixed assets3,570 3,410 Total assets $ 6,150 $ 6,385
Total liab. & equity$ 6,150 $ 6,385
What is the equity multiplier for 2010?
a) 0.52
b) 2.11
c) 2.04
d) 1.04
e) 1.56

The correct option is e) 1.56.

Explanation:

Note: The data in this question are merged together. The complete question with the sorted data is therefore provided before asnwering the question. See the attached pdf file for the complete question with the sorted data.

The explanation of the answer is now provided as follows:

The equity multiplier can be described as a financial leverage ratio gives a measure of the total assets of a company that is financed by the shareholders of the company. This can be calculated using the following formula:

Equity multiplier = Total assets / Total Shareholder's Fund (1)

Where, for Bayside, Inc. in 2010, we have:

Total assets = $6,385

Total Shareholder's Fund = Common stock + Retained earnings = $3,020 + $1,070.00 = $4,090

Substituting the figures into equation (1), we have:

Equity multiplier = $6,385 / $4,090 = 1.56

Therefore, the equity multiplier for 2010 is 1.56 and the correct option is e) 1.56.

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