The net income before taxes for the year ended was $320,000. Equity for common stockholders at the end of the year was $1,700,000 and $1,430,000 at the beginning of the year. The return on common stockholders' equity would be: (Round your answer two decimal places, X.XX%.)
A) 84.12%.
B) 20.45%.
C) 18.82%.
D) 10.22%.

Question

Quizplus · Accepted Answer

The return on common stockholders' equity is calculated as (Net Income / Average Equity) * 100. The average equity is ($1,700,000 + $1,430,000) / 2 = $1,565,000. Thus, the return is ($320,000 / $1,565,000) * 100 = 20.45%.

The Net Income Before Taxes for the Year Ended Was