Question

The following information pertains to Marsh Company for the current year: Average total assets, $400,000 Average common stockholders’ equity, $200,000 Sales, $120,000 Net income, $24,000 Dividends on common stock, $9,000 Dividends on preferred stock, $6,000 What is the company’s return on common stockholders’ equity for the current year
A. 7.5%.
B. 60%.
C. 9%.
D. 4.5%
E. 12%.

Answer 1

Answer:

Return on common stockholder equity = 9%

so correct option is C. 9%

Explanation:

given data

total assets =  $400,000

common stockholders equity = $200,000

Sales =  $120,000

Net income = $24,000

Dividends common stock = $9,000

Dividends preferred stock = $6,000

to find out

company’s return on common stockholders’ equity

solution

we get here Return on common stockholder equity is here as

Return on common stockholder equity = Net income - Preferred dividends ÷ common stockholder equity      .......................1

put here value we get

Return on common stockholder equity = $\frac{ 24000 - 6000}{ 200000}$

Return on common stockholder equity = 9%

so correct option is C. 9%