A company that has $510,000 in average common stockholders' equity, net income of $312,000 and preferred dividends paid of $15,000 has a rate of return on stockholders' equity of 61.2%

Question

Quizplus · Accepted Answer

The rate of return on stockholders' equity is calculated as (Net Income - Preferred Dividends) / Average Common Stockholders' Equity. So, it would be ($312,000 - $15,000) / $510,000 = $297,000 / $510,000 = 0.582 or 58.2%.

A Company That Has $510,000 in Average Common Stockholders' Equity