Question

Use the following information to answer this question. Bayside, Inc. 2010 Income Statement ($ in thousands) Net sales $ 6,090 Less: Cost of goods sold 4,300 Less: Depreciation 410 Earnings before interest and taxes $ 1,380 Less: Interest paid 34 Taxable Income $ 1,346 Less: Taxes 404 Net income $ 942 Bayside, Inc. 2009 and 2010 Balance Sheets ($ in thousands) 2009 2010 2009 2010 Cash $ 125 $ 230 Accounts payable $ 1,630 $ 1,580 Accounts rec. 1,030 870 Long-term debt 830 630 Inventory 1,745 2,060 Common stock $ 3,280 $ 3,300 Total $ 2,900 $ 3,160 Retained earnings 900 1,150 Net fixed assets 3,740 3,500 Total assets $ 6,640 $ 6,660 Total liab. & equity $ 6,640 $ 6,660 What is the return on equity for 2010?

Answer 1

Answer:

RETURN ON EQUITY 21,17%

$942,000/$4,450,000 = 21,17%

Explanation:

The ROE let see if the investors are getting a good return on their investment., while the company can measure how efficiently they are in the use of the equity.

2009       2010 BALANCE SHEETS

$125,000 $230,000 Cash

$1.030,000 $870,000 Accounts Receivable

$1.745,000 $2.060,000 Inventory

$2.900,000 $3.160,000  TOTAL CURRENT ASSETS  

$3.740,000 $3.500,000 Property and Equipment

$3.740,000 $3.500,000  TOTAL NONCURRENT ASSETS  

$6.640,000 $6.660,000  TOTAL ASSETS  

$1.630,000 $1.580,000  Accounts Payable

$1.630,000 $1.580,000  TOTAL CURRENT LIABILITIES  

$830,000 $630,000  Long-Term Debt

$830,000 $630,000  TOTAL NONCURRENT LIABILITIES  

$2.460,000 $2.210,000  TOTAL LIABILITIES

$3.280,000 $3.300,000  Common Stock  

$900,000 $1.150,000  Retained Earnings  

$4.180,000 $4.450,000  TOTAL SHAREHOLDERS SEQUITY  

$6.640,000 $6.660,000  TOTAL EQUITY & LIABILITIES