Excerpts from Lasso Corporation's most recent balance sheet appear below Net income for Year 2 was $145,000.Dividends on common stock were $55,000 in total and dividends on preferred stock were $20,000 in total.The return on common stockholders' equity for Year 2 is closest to:
A)12.3%
B)8.1%
C)13.0%
D)14.3%

Question

Excerpts from Lasso Corporation's most recent balance sheet appear below Net income for Year 2 was $145,000.Dividends on common stock were $55,000 in total and dividends on preferred stock were $20,000 in total.The return on common stockholders' equity for Year 2 is closest to:
A)12.3% 
B)8.1% 
C)13.0% 
D)14.3%

Quizplus · Accepted Answer

The return on common stockholders' equity is calculated as net income divided by common stockholders' equity. In this case, the net income for Year 2 was $145,000 and the common stockholders' equity at the end of Year 2 was $750,000 ($1,150,000 - $100,000 - $400,000). Therefore, the return on common stockholders' equity for Year 2 is $145,000 / $750,000 = 19.3%.

Excerpts from Lasso Corporation's Most Recent Balance Sheet Appear