Fongeallaz Corporation's income statement for Year 2 appears below:
The company's total stockholders' equity at the end of Year 2 amounted to $841,000 and at the end of Year 1 to $810,000.The company's return on equity for Year 2 is closest to:

Question

Fongeallaz Corporation's income statement for Year 2 appears below:
 The company's total stockholders' equity at the end of Year 2 amounted to $841,000 and at the end of Year 1 to $810,000.The company's return on equity for Year 2 is closest to:

Quizplus · Accepted Answer

Return on equity = Net income ÷ Average stockholders' equity*
= $39,000 ÷ $825,500 = 4.72% (rounded)
*Average stockholders' equity = ($841,000 + $810,000) ÷ 2 = $825,500

Fongeallaz Corporation's Income Statement for Year 2 Appears Below