Question

Common Stockholders' Profitability Analysis

A company reports the following:

Net income	$190,000
Preferred dividends	7,600
Average stockholders' equity	1,743,119
Average common stockholders' equity	872,727

Determine (a) the return on stockholders’ equity and (b) the return on common stockholders’ equity. If required, round your answers to one decimal place.

a. Return on Stockholders' Equity	%
b. Return on Common Stockholders’ Equity	%

Answer 1

Answer
1	return on stock holders equity				10.90%
2	return on common stock holders equity				20.90%
	return on stock holders equity
		net income/average stock holders equity
		190000/1743119 =		10.90%
	return on common stock holders equity
		(net income-preference divident)/average common stock holders equity
		(190000-7600)/872727 =			20.90%