Selected financial data for Irvington Company appear below:
During the year,the company paid dividends of $10,000 on its preferred shares.The company's net income for the year was $120,000.The company's return on common shareholders' equity for the year was closest to which of the following?
A) 17%.
B) 19%.
C) 23%.
D) 25%.Return on Common SE = (120,000 - 10,000)/480,000 = 23%.

Question

Selected financial data for Irvington Company appear below: 
During the year,the company paid dividends of $10,000 on its preferred shares.The company's net income for the year was $120,000.The company's return on common shareholders' equity for the year was closest to which of the following?
A) 17%. 
B) 19%. 
C) 23%. 
D) 25%.Return on Common SE = (120,000 - 10,000)/480,000 = 23%.

Quizplus · Accepted Answer

We can calculate the return on common shareholders' equity by subtracting the dividends paid on preferred shares from the net income and dividing by the common shareholders' equity. In this case, the calculation is ($120,000 - $10,000)/$480,000 = 0.23 or 23%. Therefore, the closest answer is C, 23%.

Selected Financial Data for Irvington Company Appear Below