Question

The net income of a company for the year was​ $570,000. The company has no preferred stock. Common​ stockholders' equity was​ $1,800,000 at the beginning of the year and​ $2,300,000 at the end of the year. Calculate the rate of return on common​ stockholders' equity.​ (Round your answer to two decimal​ places.)

Answer 1

Answer:

The rate of return on common​ stockholders' equity is 27.80%.

Explanation:

Return on common shareholders equity

= net income of a company for the year/[ Common​ stockholders' equity at the beginning of the year +  Common​ stockholders' equity was at the end of the year]

= $570,000/[$1,800,000 + $2,300,000]/2

= 27.80%

Therefore, the rate of return on common​ stockholders' equity is 27.80%.