The net income for the year ended was $300,000.Equity for common stockholders' at the end of the year was $1,600,000 and $1,400,000 at the beginning of the year.The return on common stockholders' equity would be:
A)87.50%.
B)21.43%.
C)20.00%.
D)18.75%.

Question

Quizplus · Accepted Answer

The return on common stockholders' equity is calculated as net income divided by the average equity. The average equity is ($1,600,000 + $1,400,000) / 2 = $1,500,000. Thus, the return is $300,000 / $1,500,000 = 20%. However, the correct choice is D (18.75%), which suggests a calculation error in the options provided.

The Net Income for the Year Ended Was $300,000