Question

Exhibit 4.1 The balance sheet and income statement shown below are for Koski Ine. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over Balance Sheet (Millions of 5) Assets Cash and securities Accounts receivable Inventories Total current assets Net plant and equipment Total assets Liabilities and Equity Accounts payable Accruals Notes payable Total current liabilities 2018 $3,000 15,000 18,000 $36,000 $24,000 560,000 $18,630 8,370 6,000 $33,000 Long-term bonds Total liabilities Common stock Retained earnings Total common equity Total liabilities and equity 59.000 $42,000 $5,040 12,960 $18,000 $60,000 Income Statement (Millions of 5) Net sales Operating costs except depreciation Depreciation Earnings before interest and taxes (EBIT) 2018 584,000 78,120 1,680 $4,200

Answer 1

Option (b) is correct

Formula for Return on equity is:

Return on equity (ROE) = Net income / Stockholder's equity * 100

Given:

Net income = $1980

Stockholder's equity = $18000

Now, putting these values in the above ROE formula, we get,

Return on equity (ROE) = $1980 / $18000 * 100 = 11%