Dixie Company reports the following amounts for 2017. $$\begin{array} { l r }
\text { Net income } & \$ 300,000 \
\text { Average, stockholders' equity } & 2,000,000 \
\text { Preferred dividends } & 84,000 \
\text { Par value preferred stock } & 400,000
\end{array}$$ The 2017 rate of return on common stockholders' equity is

Question

Dixie Company reports the following amounts for 2017. $$\begin{array} { l r } 
\text { Net income } & \$ 300,000 \
\text { Average, stockholders' equity } & 2,000,000 \
\text { Preferred dividends } & 84,000 \
\text { Par value preferred stock } & 400,000
\end{array}$$ The 2017 rate of return on common stockholders' equity is

Quizplus · Accepted Answer

The rate of return on common stockholders' equity is calculated as (Net Income - Preferred Dividends) / Average Common Stockholders' Equity. Here, it is ($300,000 - $84,000) / ($2,000,000 - $400,000) = $216,000 / $1,600,000 = 13.5%.

Dixie Company Reports the Following Amounts for 2017 The 2017 Rate of Return on Common Stockholders' Equity Is