Mars Corporation has provided the following data for Year 2: The company's total stockholders' equity at the end of Year 2 amounted to $1,095,000 and at the end of Year 1 to $1,060,000.The company's return on equity for Year 2 is closest to:
A)5.91%
B)7.40%
C)3.84%
D)71.20%

Question

Mars Corporation has provided the following data for Year 2:  The company's total stockholders' equity at the end of Year 2 amounted to $1,095,000 and at the end of Year 1 to $1,060,000.The company's return on equity for Year 2 is closest to:
A)5.91% 
B)7.40% 
C)3.84% 
D)71.20%

Quizplus · Accepted Answer

Return on equity = Net income ÷ Average stockholders' equity*
= $41,400 ÷ $1,077,500 = 3.84% (rounded)
*Average stockholders' equity = ($1,095,000 + $1,060,000)÷ 2 = $1,077,500

Mars Corporation Has Provided the Following Data for Year 2