Cannot select 5.1 surround sound option? What am I missing?

My iMac is connected to my digial 5.1 speaker system with a toslink digital audio cable. However, when I go to Utilities > Audio MIDI Setup, I click "Configure Speakers", then "Multichannel", the only option I am allowed to select is "Stereo" ... the "5.1 Surround" option is greyed out. What am I missing here?

The next step would be some basic troubleshooting.
Reset the PRAM. Shut down your computer, then turn on the computer and immediately press and hold Command (Apple)-Option-P-R until you hear the startup sound for the second time.
Then Repair Permissions. In Apps/Utilities/Disk Utility, select the startup disk in the list on the left. Click First Aid. Click Repair Disk Permissions to test and repair permissions. Do this until no more repairs are reported. (You should always Repair Permissions after installing OS X, Security and Apple app updates/upgrades, as a precaution.)
A good resource for maintaining and troubleshooting the Mac is the X Labs.

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