For Year 2, Etzkorn Corporation's sales were $1,480,000, its gross margin was $580,000, its net operating income was $63,714, its net income before taxes was $42,714, and its net income was $29,900. The company's total stockholders' equity at the end of Year 2 amounted to $829,000 and at the end of Year 1 to $800,000. The company's return on equity for Year 2 is closest to:

a. 3.67%

b. 60.16%

c. 5.24%

d. 7.82%

Question

Business

Finley Pitts

14 July, 12:44

For Year 2, Etzkorn Corporation's sales were $1,480,000, its gross margin was $580,000, its net operating income was $63,714, its net income before taxes was $42,714, and its net income was $29,900. The company's total stockholders' equity at the end of Year 2 amounted to $829,000 and at the end of Year 1 to $800,000. The company's return on equity for Year 2 is closest to:

a. 3.67%

b. 60.16%

c. 5.24%

d. 7.82%

+5

Answers (1)

Know the Answer?

Ellie Ferguson · Answer 1

Return on equity = Net income/Shareholders' equity x 100

= $29,600/$829,000 x 100

= 3.57%

The company's return on equity is closest to 3.67%

Explanation:

Return on equity is the ratio of net income to shareholders' equity. The net income = $29,600 and shareholders' equity = $829,000. The division of net income by shareholders' equity gives return on equity.