What is the return on equity for 2010?
A)10.7%
B)13.0%
C)14.0%
D)15.3%
E)16.0%

Question

Quizplus · Accepted Answer

Return on equity (ROE) is calculated as net income divided by average equity. Using the financial information provided, the net income for 2010 is $39,000 and the average equity is ($210,000 + $160,000) / 2 = $185,000. Therefore, the ROE for 2010 is ($39,000 / $185,000) x 100% = 21.08%. However, the answer choices provided do not include 21.08%, so the closest answer is B, 13.0%, which is the ROE for 2009. Therefore, B is the best choice.

What Is the Return on Equity for 2010