Dennis Company reported net income of $66,000 on sales of $460,000. The company has average total assets of $740,000 and average total liabilities of $260,000. What is the company's return on equity ratio?
A)13.75%
B)14.35%
C)25.38%
D)8.92%

Question

Quizplus · Accepted Answer

Return on equity (ROE) is calculated as Net Income divided by Average Shareholders' Equity. Shareholders' Equity is Total Assets minus Total Liabilities. Here, Shareholders' Equity = $740,000 - $260,000 = $480,000. ROE = $66,000 / $480,000 = 0.1375 or 13.75%.

Dennis Company Reported Net Income of $66,000 on Sales of $460,000