Table 3.2
Dana Dairy Products Key Ratios Income Statement
Dana Dairy Products
For the Year Ended December 31, 2010 Balance Sheet
Dana Dairy Products
December 31, 2010
-The return on equity for Dana Dairy Products for 2010 was ________. (See Table 3.2)
A) 0.6 percent
B) 5.6 percent
C) 0.9 percent
D) 50 percent

Question

Table 3.2
Dana Dairy Products Key Ratios  Income Statement
Dana Dairy Products
For the Year Ended December 31, 2010  Balance Sheet
Dana Dairy Products
December 31, 2010 
-The return on equity for Dana Dairy Products for 2010 was ________. (See Table 3.2)
A) 0.6 percent 
B) 5.6 percent 
C) 0.9 percent 
D) 50 percent

Quizplus · Accepted Answer

To calculate the return on equity, we need to divide net income by the average equity for the year. Looking at the income statement and balance sheet in Table 3.2, we can see that net income for 2010 was $280,000 and the average equity for the year was ($3,800,000 + $3,200,000)/2 = $3,500,000. Therefore, the return on equity for 2010 was ($280,000/$3,500,000) x 100% = 8%. The closest choice to this answer is B, 5.6%, which is the result of rounding 8% to one decimal point.

Table 3.2 Dana Dairy Products Key Ratios Income Statement