Question

The Income Statement and Balance Sheet can tell you your return on equity: profit divided by equity. Last year you made a profit of $74,261 and the balance sheet shows your ending equity at $2,497,286. What is your return on equity? a) About 3% b) about 4% c) about 6% d) about 9%

Answer 1

Answer:

Return on equity = 3% (Approx.)

Explanation:

Given:

Profit = $74,261

Ending equity = $2,497,286

Find:

Return on equity

Computation:

Return on equity = [Profit / Ending equity]100

Return on equity = [74,261/2,497,286]100

Return on equity = 2.9736

Return on equity = 3% (Approx.)