Calculate the return on equity ratio for the current year.
A)66.66%
B)60.61%
C)50.42%
D)80.81%

Question

Quizplus · Accepted Answer

Return on equity ratio is calculated by dividing net income by average shareholder equity. 
Return on Equity = (Net Income / Average Shareholder Equity) x 100 
Based on the information provided, 
Net Income = $40,000 
Average Shareholder Equity = ($100,000 + $60,000) / 2 = $80,000 
Return on Equity = (40,000 / 80,000) x 100 = 50.5% 
The closest answer choice to this calculation is B) 60.61%.

Calculate the Return on Equity Ratio for the Current Year