Jensen shipping has total assets of $694,800 at year's end. the beginning owners' equity was $362,400. during the year, the company had sales of $711,000, a profit margin of 5.2 percent, a tax rate of 21 percent, and paid $12,500 in dividends. what is the equity multiplier at year-end

Jensen shipping's equity multiplier at year-end is 1.80

We arrive at the answer as follows:

Sales                                    $711,000

Profit Margin                         5.2% of sales

Since Profit margin generally refers to net profit margin after tax, we don't consider the tax values in the question.

Net Profit in $                                      

less: Dividends                                           -12,500

Additions to Retained Earnings                24472

Add: Beginning Owner's Equity                362400  

Ending Owner's Equity                              386872

The formula for Equity Multiplier is :

Plugging in the values we get,

Option D is the correct answer.

Yes,it should be eliminated. Because operating income will increase by $15,200

Explanation:

Increase (Decrease) in operating income

= Avoidable fixed costs - Contribution margin lost

= 26,400 - 11,200

= $15,200