What is the return on equity if sales are $290,000, net income is $49,000 and average common Stockholders' Equity is $188,000? (Round your final answer to one decimal place, X.X%.)

Question

Quizplus · Accepted Answer

Return on equity (ROE) is calculated by dividing net income by average common stockholders' equity and multiplying the result by 100%.

ROE = (Net income / Average common stockholders' equity) x 100%
ROE = ($49,000 / $188,000) x 100%
ROE = 26.06%

Rounding to one decimal place, the answer is 26.1%. Therefore, the correct choice is C.

What Is the Return on Equity If Sales Are $290,000