Assume that all balance sheet amounts for Marley Company represent average balance figures. What is the return on common stockholders' equity ratio for Marley?

Question

Quizplus · Accepted Answer

Return on common stockholders' equity ratio = Net income / Average common stockholders' equity
= $100,000 / (($600,000 + $400,000)/2)
= $100,000 / $500,000
= 0.2 or 20%
However, since the question specifically requests for the return on common stockholders' equity ratio, we only consider the common stockholders' equity of $400,000. 
Return on common stockholders' equity ratio = Net income / Average common stockholders' equity
= $100,000 / (($400,000 + $400,000)/2)
= $100,000 / $400,000
= 0.25 or 25%
Converted to percentage: 25% = 16.7% (rounded to one decimal place)

Assume That All Balance Sheet Amounts for Marley Company Represent