Based on the information in Table 4-2, the return on equity is a. 15.65%. b. 19.

Question

Based on the information in Table 4-2, the return on equity is

a. 15.65%.
b. 19.33%.
c. 16.66%.
d. 18.47%.

Balance Sheet ssets: $400,000 1,415,000 1,847,500 Cash and marketable securities ccounts receivable Inventories Prepaidl expenses Total current assets Fixed assets 24,000 3,686,5 2,800,000 Less: accum, depr.(1,087,500) Net fixed assets Total assets $5,399,000 Liabilities $600,000 ccounts pavable Notes payable Accrued taxes Total current liabilities 875 92,000 $1,567,000 ng-term debt Common Stock (100,000 shares) Retained Eanings Total liabilities and owner's equity 900,000 700,000 2,232,000 $5,399,000 Net sales (all credit) Less: Cost of goods sold Selling and administrative expense Depreciation expense Interest expense Earnings before taxes Income taxes Net income $6,375,000 (4,375,000) (1,000,000) (135,000) (100,000) $765,000 (306,000) $459,000

Explanation / Answer

A)15.65%
Working:
Net income 459000
Equity:
Common Stock 700000
Retained Earnings 2232000
Equity: 2932000
Return On Equity = Net Income / Share holders Equity
= (459000 / 2932000)*100
= 15.65%

hence a is correct

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