Crawler Company's net income last year was $80,000.The company paid dividends on preferred shares of $10,000,and its average common shareholders' equity was $400,000.The company's return on common shareholders' equity for the year was closest to which of the following?
A) 2.5%.
B) 17.5%.
C) 20.0%.
D) 22.5%.

Question

Quizplus · Accepted Answer

The return on common shareholders' equity is calculated by subtracting preferred dividends from net income and then dividing by average common shareholders' equity. So, ($80,000 - $10,000) / $400,000 = $70,000 / $400,000 = 17.5%.

Crawler Company's Net Income Last Year Was $80,000