Following is financial statement information for Rogex Corporation: cash = $242; accounts receivable = $850; inventory = $820; net fixed assets = $3,408; accounts payable = $700; short-term notes payable = $740; long-term liabilities = $1,100; common stock = $1,160; retained earnings = $1,620; net sales = $2,768; cost of goods sold = $1,210; depreciation = $360; interest expense = $160; taxes = $312; addition to retained earnings = $508; and dividends paid = $218. What is the return on equity for Rogex?
A)26.1%
B)44.7%
C)62.6%
D)18.4%

Question

Quizplus · Accepted Answer

Return on equity (ROE) is calculated as:

ROE = Net Income / Shareholders' Equity

Net income can be calculated as:

Net Income = Net Sales - Cost of Goods Sold - Depreciation - Interest Expense - Taxes

Net Income = 2,768 - 1,210 - 360 - 160 - 312

Net Income = 726

Shareholders' equity is calculated as:

Shareholders' Equity = Common Stock + Retained Earnings

Shareholders' Equity = 1,160 + 1,620

Shareholders' Equity = 2,780

Therefore,

ROE = Net Income / Shareholders' Equity

ROE = 726 / 2,780

ROE = 0.261 or 26.1%

Following Is Financial Statement Information for Rogex Corporation: Cash =