California Clothing reports net income and sales for the year of $65,000 and $1,300,000,respectively.Return on equity is 10%.What is California Clothing's average Stockholders' Equity for the year?

Question

Quizplus · Accepted Answer

Return on equity (ROE) is calculated as Net Income divided by Average Stockholders' Equity. Given ROE is 10% and Net Income is $65,000, we can set up the equation: $65,000 / Average Stockholders' Equity = 0.10. Solving for Average Stockholders' Equity gives $650,000.

California Clothing Reports Net Income and Sales for the Year