Use the table for the question(s)below.
Consider the following income statement and other information:
Luther Corporation
Consolidated Income Statement
Year ended December 31 (in $ millions)
-Luther's return on equity (ROE)for the year ending December 31,2019 is closest to:
A)2.0%.
B)6.5%.
C)8.4%.
D)12.7%.

Question

Use the table for the question(s)below.
Consider the following income statement and other information:
Luther Corporation
Consolidated Income Statement
Year ended December 31 (in $ millions) 
-Luther's return on equity (ROE)for the year ending December 31,2019 is closest to:
A)2.0%. 
B)6.5%. 
C)8.4%. 
D)12.7%.

Quizplus · Accepted Answer

ROE = Net income / Average equity
Average equity = (Beginning equity + Ending equity)/2
Average equity = (1050+985)/2 = 1017.5
ROE = 74/1017.5 = 0.0729 or 7.29%
Therefore, the closest answer is C) 8.4%

Use the Table for the Question(s)below