For Year 2, Etzkorn Corporation's sales were $1,480,000, its gross margin was $580,000, its net operating income was $63,714, its net income before taxes was $42,714, and its net income was $29,900. The company's total stockholders' equity at the end of Year 2 amounted to $829,000 and at the end of Year 1 to $800,000. The company's return on equity for Year 2 is closest to:
A) 3.67%
B) 60.16%
C) 5.24%
D) 7.82%

Question

Quizplus · Accepted Answer

Return on equity (ROE) is calculated as Net Income divided by Average Stockholders' Equity. The average equity is ($829,000 + $800,000) / 2 = $814,500. ROE = $29,900 / $814,500 = 3.67%.

For Year 2, Etzkorn Corporation's Sales Were $1,480,000, Its Gross