Settles Corporation has provided the following financial data:
Dividends on common stock during Year 2 totaled $5,400. The market price of common stock at the end of Year 2 was $5.89 per share.
-The company's return on equity for Year 2 is closest to:
A) 3.31%
B) 8.50%
C) 5.09%
D) 50.52%

Question

Settles Corporation has provided the following financial data:
   Dividends on common stock during Year 2 totaled $5,400. The market price of common stock at the end of Year 2 was $5.89 per share.
-The company's return on equity for Year 2 is closest to:
A) 3.31% 
B) 8.50% 
C) 5.09% 
D) 50.52%

Quizplus · Accepted Answer

Return on equity = Net income ÷ Average stockholders' equity*
= $18,400 ÷ $556,500 = 3.31% (rounded)
*Average stockholders' equity = ($563,000 + $550,000) ÷ 2 = $556,500

Settles Corporation Has Provided the Following Financial Data