Donaghue Company\'s financial statements follow: Donaghue\'s return on stockhold
ID: 2590440 • Letter: D
Question
Donaghue Company's financial statements follow: Donaghue's return on stockholders' equity for 2014 is
A. $2,479 million. / B. 20.9%. / C. 13.8%. /D. 9.66%.
Donaghue Company
Consolidated Balance Sheets
December 31, 2014 and 2013
(In millions, except per share data)
2014
2013
Assets
Current assets:
Cash and equivalents
$590 $445
Accounts and notes receivable
760 836
Inventories, at cost, not in excess of market
140 110
Prepaid expense and other current assets
500 415
Total current assets
1,990
1,806
Property and equipment:
Property and equipment, at cost
28,760
26,600
Accumulated depreciation and amortization
(8,830)
(7,900)
Net property and equipment
19,930
18,700
Other assets:
Investments in affiliates
1,070
1,020
Goodwill, net
1,720
1,590
Miscellaneous
950
1,130
Total other assets
3,740
3,740
Total assets
$25,660
$24,246
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
$570
$610
Income taxes
72
18
Other taxes
225
185
Accrued interest
183
180
Accrued restructuring and restaurant closing costs
130
305
Accrued payroll and other liabilities
912
725
Current maturities of long-term debt
386
275
Total current liabilities
2,478
2,298
Long-term debt
8,800
9,300
Other long-term liabilities and minority interests
730
560
Deferred income taxes
1,030
1,015
Total liabilities
$13,038
$13,173
Stockholders' equity:
Preferred stock, no par value; authorized—140.0 million shares; issued—none
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Common stock, $.01 par value; authorized—2.0 billion shares;
issued—1,700 million shares
17
17
Additional paid-in capital
1,141
2,130
Unearned ESOP compensation
(95)
(104)
Retained earnings
21,809
19,600
Accumulated other comprehensive income (loss)
(850)
(1,570)
Common stock in treasury, at cost; 800 and 1,000 million shares
(9,400)
(9,000)
Total stockholders' equity
12,622
11,073
Total liabilities and stockholders' equity
$25,660
$24,246
Donaghue Company
Consolidated Statements of Income (Adapted)
Years Ended December 31, 2014 and 2013
(In millions, except per share data)
2014
2013
Revenues
Sales by Company-operated restaurants
$13,400 $11,400
Revenues from franchised and affiliated restaurants
4,500 3,700
Total revenues
17,900 15,100
Food and paper (Cost of goods sold)
2,680 3,990
Payroll and employee benefits
4,000 2,900
Occupancy and other operating expenses
3,300 2,500
Franchised restaurants—occupancy expenses
943 830
Selling, general, and administrative expenses
1,845 1,725
Other operating expense, net
545 855
Total operating expenses
13,313 12,800
Operating income
4,587 2,300
Interest expense
360 350
Other nonoperating expense, net
96 63
Income before income taxes
4,131 1,887
Income tax expense
1,652 660
Net income
$2,479 $1,227
Per common share basic:
Net Income
$2.75 $1.75
Dividends per common share
$0.30 $0.45
(In millions, except per share data)
2014
2013
Explanation / Answer
Return on stockholder equity= net income 2014/(stockholder equity 2014+stockholder equity 2013)/2)
=2479/((12622+11073)/2)
=20.9%
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