The balance sheet of California Clothing reports total equity of $600,000 and $700,000 at the beginning...
The balance sheet of California Clothing reports total equity of $600,000 and $700,000 at the beginning and end of the year, respectively. Net income and sales for the year are $65,000 and $1,300,000, respectively. What is California Clothing's return on equity?
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200%. |
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20%. |
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10%. |
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5%. |
Homework Answers
Answer: option 10% is correct
Explanation:
Average equity = (Opening equity + Closing equity)/ 2
= ($600,000 + $700,000) /2
= $650,000
Return on equity = Net income / Average equity
= $65,000 / $650,000
= 10%
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