Financial statements for Larned Company appear below: Dividends during Year 2 totaled $263 thousand, of which $12 thousand were preferred dividends.
The market price of a share of common stock on December 31, Year 2 was $160.

-Larned Company's return on common stockholders' equity for Year 2 was closest to:
A)29.8%
B)26.9%
C)30.9%
D)27.9%

Question

Financial statements for Larned Company appear below:   Dividends during Year 2 totaled $263 thousand, of which $12 thousand were preferred dividends.
The market price of a share of common stock on December 31, Year 2 was $160.

-Larned Company's return on common stockholders' equity for Year 2 was closest to:
A)29.8% 
B)26.9% 
C)30.9% 
D)27.9%

Quizplus · Accepted Answer

Return on common stockholders' equity
= (Net income - Preferred dividends)F1F1F1S1F1F1F10 Average common stockholders' equity
= ($343 - $12)F1F1F1S1F1F1F10 $1,110* = 29.8%
*Average common stockholders' equity = ($1,150 + $1,070)F1F1F1S1F1F1F10 2 = $1,110

Financial Statements for Larned Company Appear Below: Dividends