A firm has total assets of $800,000 and total liabilities of $300,000. Earnings before interest and taxes are $100,000. Interest is $21,000 and taxes are $34,000. The return on shareholders' funds is:
A) 9.0%.
B) 8.0%.
C) 12.5%.
D) 3.8%.

Question

Quizplus · Accepted Answer

Return on shareholders' funds = (Earnings before interest and taxes - Interest - Taxes) / Shareholders' funds= (100,000 - 21,000 - 34,000) / (800,000 - 300,000)= 45,000 / 500,000= 9.0%

A Firm Has Total Assets of $800,000 and Total Liabilities