Question

Excerpts from hulkster company's december 31, 2018 and 2017, financial statements are presented below: 2018 2017 accounts receivable $ 52,000 $ 42,000 merchandise inventory 34,000 47,000 net sales 216,200 210,000 cost of goods sold 126,000 114,000 total assets 437,000 411,000 total shareholders' equity 252,000 231,000 net income 41,500 34,000 hulkster's 2018 return on shareholders' equity is:

Answer 1

Calculation of Hulkster's 2018 return on shareholders' equity:

Return on shareholders' equity can be calculated with the help of following formula:

Return on shareholders' equity=  Net Income / Average shareholders' equity

Following information is available:

Net Income for the year 2018 =$41,500

Shareholders' equity 2018 = $252,000

Shareholders' equity 2017 = $231,000

Average shareholders' equity = (252000+231000) /2 = $241,500

Return on shareholders' equity for 2018 =  41500/241500 = 0.1718 =17.18%

Hence, Hulkster's 2018 return on shareholders' equity is 17.18%