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:

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:

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