Price Printing Co. had sales of $10 million, operating income of $3 million, after-tax income of $1 million, assets of $8 million, stockholders' equity of $5 million, and a total debt of $3 million. What is Price Printing Company's return on equity?
A)37.5%
B)10.0%
C)20.0%
D)60.0%
E)12.5%

Question

Quizplus · Accepted Answer

Return on equity (ROE) is calculated by dividing after-tax income by stockholders' equity. 
ROE = (After-tax income / Stockholders' equity) x 100% 
ROE = ($1 million / $5 million) x 100% 
ROE = 20% 
Therefore, the correct answer is C) 20.0%.