Crabtree Company's net income last year was $50,000.The company paid preferred dividends of $20,000 and its average common shareholders' equity was $440,000.The company's return on common shareholders' equity for the year was closest to:
A) 4.5%.
B) 6.8%.
C) 11.4%.
D) 15.9%.

Question

Quizplus · Accepted Answer

Return on common shareholders' equity is calculated as (Net Income - Preferred Dividends) / Average Common Shareholders' Equity. Here, it is ($50,000 - $20,000) / $440,000 = $30,000 / $440,000 = 6.8%.

Crabtree Company's Net Income Last Year Was $50,000