The return on average total stockholders' equity during the year (rounded to the nearest 1 percent) was:
A) 50%.
B) 41%.
C) 38%.
D) Some other answer.

Question

Quizplus · Accepted Answer

To calculate the return on average total stockholders' equity, we divide net income by average total stockholders' equity. From the information given, net income is $4 million ($1 million increase from the previous year) and average total stockholders' equity is $10.5 million (($10 million beginning balance + $11 million ending balance)/2). Therefore, the return on average total stockholders' equity is 38% ($4 million / $10.5 million).

The Return on Average Total Stockholders' Equity During the Year