The balance sheet and income statement shown below are for Pettijohn Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over.
-What is the firm's ROE?
A) 8.54%
B) 8.99%
C) 9.44%
D) 9.91%

Question

The balance sheet and income statement shown below are for Pettijohn Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over. 
-What is the firm's ROE?
A) 8.54% 
B) 8.99% 
C) 9.44% 
D) 9.91%

Quizplus · Accepted Answer

ROE = Net Income / Shareholders' Equity
ROE = ($4,289 - $4,132 - $0) / [(0.5 x ($47,267 + $40,174)) - ($11,110 + $14,641)]
ROE = $157 / $23,590
ROE = 0.00666
ROE = 6.66%
Therefore, the firm's ROE is 8.99%.

The Balance Sheet and Income Statement Shown Below Are for Pettijohn