What is the return on equity if sales are $130,000, net income is $25,700, beginning Stockholders' Equity is $93,000, and ending common Stockholders' Equity is $87,000? (Round your final answer to two decimal places, X.XX%)
A)72.22%
B)27.63%
C)29.54%
D)28.56%

Question

Quizplus · Accepted Answer

Return on Equity (ROE) is calculated by dividing Net Income by Average Stockholders' equity. 
Average Stockholders' Equity = (Beginning Stockholders' Equity + Ending Stockholders' Equity)/2

Average Stockholders' Equity = ($93,000 + $87,000)/2 = $90,000

ROE = Net Income / Average Stockholders' Equity
ROE = $25,700 / $90,000
ROE = 0.2856 or 28.56%

Therefore, the correct answer is (D) 28.56%.

What Is the Return on Equity If Sales Are $130,000