ZeroFued's net income for the year was $300,000.Average assets totaled $2 million, and average liabilities totaled $500,000.Return on equity (ROE)was:
A)12%
B)15%
C)20%
D)60%

Question

Quizplus · Accepted Answer

Return on equity (ROE) is calculated as Net Income divided by Average Shareholders' Equity. Shareholders' Equity is Average Assets minus Average Liabilities, which is $2,000,000 - $500,000 = $1,500,000. ROE = $300,000 / $1,500,000 = 0.20 or 20%.

ZeroFued's Net Income for the Year Was $300,000