A firm with sales of $1,000,000, net profits after taxes of $30,000, total assets of $1,500,000, and common stockholders' investment of $750,000 has a return on equity of ________.
A) 20 percent
B) 15 percent
C) 3 percent
D) 4 percent

Question

Quizplus · Accepted Answer

Return on Equity (ROE) is calculated as Net Profits after Taxes divided by Common Stockholders' Investment. In this case, ROE = $30,000 / $750,000 = 0.04 or 4%.

A Firm with Sales of $1,000,000, Net Profits After Taxes