Excerpts from Goodrow Corporation's most recent balance sheet and income statement appear below: Dividends on common stock during Year 2 totaled $20 thousand. Dividends on preferred stock totaled $10 thousand. The market price of common stock at the end of Year 2 was $5.34 per share.
-The return on common stockholders' equity for Year 2 is closest to:
A)8.70%
B)10.17%
C)10.14%
D)11.86%

Question

Excerpts from Goodrow Corporation's most recent balance sheet and income statement appear below:   Dividends on common stock during Year 2 totaled $20 thousand. Dividends on preferred stock totaled $10 thousand. The market price of common stock at the end of Year 2 was $5.34 per share.
-The return on common stockholders' equity for Year 2 is closest to:
A)8.70% 
B)10.17% 
C)10.14% 
D)11.86%

Quizplus · Accepted Answer

Return on common stockholders' equity
= (Net income - Preferred dividends)F1F1F1S1F1F1F10 Average common stockholders' equity
= ($70 - $10)F1F1F1S1F1F1F10 $590* = 10.17%
*Average common stockholders' equity = ($610 + $570)F1F1F1S1F1F1F10 2 = $590

Excerpts from Goodrow Corporation's Most Recent Balance Sheet and Income