Question

On December​ 31, Sulfur Corporation has the following data​ available: Net Income $ 170 comma 000 Interest expense 30 comma 000 Total assets at the beginning of the year 770 comma 000 Total assets at the end of the year 900 comma 000 Total common​ stockholders' equity at the beginning of the year 410 comma 000 Total common​ stockholders' equity at the end of the year 290 comma 000
What is return on​ equity? (Round your final answer to two decimal​ places, X.XX%.)

Answer 1

Answer:

40%

Explanation:

The computation of the return on equity is shown below:

= (Net income - interest expense) ÷ (weightage average of common​ stockholders' equity)

where,

Weightage average of common​ stockholders' equity equals to

= (Total common​ stockholders' equity at the beginning of the year + Total common​ stockholders' equity at the end of the year) ÷ 2

= ($410,000 + $290,000) ÷ 2

= $350,000

And, the other items values would remain the same

Now put these values to the above formula

So, the value would be equal to

= ($170,000 - $30,000) ÷ ($350,000)

= 40%