Question

Using the data provided for a company in New York, what is the return on common stockholders’ equity?

The following information pertains to a company in New York. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit. Use this information to answer the questions that follow. ​ Assets Cash and short-term investments $ 30,000 Accounts receivable (net) 20,000 Inventory 15,000 Property, plant, and equipment 185,000 Total assets $250,000 Liabilities and Stockholders’ Equity    Current liabilities $ 45,000 Long-term liabilities 70,000 Stockholders’ equity—Common 135,000 Total liabilities and stockholders’ equity $250,000 Income Statement    Sales $ 85,000 Cost of goods sold 45,000 Gross margin $ 40,000 Operating expenses (15,000) Interest expense (5,000) Net income $ 20,000 Number of shares of common stock outstanding 6,000 Market price of common stock $20 Total dividends paid $9,000 Cash provided by operations $30,000

Group of answer choices

7.4%

14.8%

13.5%

6.75%

Answer 1

Return on Common Stockholder's equity = Net income/Shareholder's equity

= 20000/135000

Return on Common Stockholder's equity = 14.8%

So answer is b) 14.8%