Question

Galaxy United, Inc. 2009 Income Statement Net sales Less: Cost of goods sold Less: Depreciation Earnings before interest and taxes Less: Interest paid Taxable income Less: Taxes Net income $627,800 521,400 11.200 95,200 10,100 $85,100 28.900 $56,200 Galaxy United, Inc. 2008 and 2009 Balance Sheets Cash Accounts rec. Inventory Sub total Net fixed assets Total 2008 2009 $17,000 $24,700 54,100 56,700 189.400 186.700 $260,500 $268,100 261,300 279,400 $521,800 $547.500 Accounts payable Long-term debt Common stock Retained earnings 2008 2009 $128,600 $134,700 147,500 141,000 125,000 140,000 120.700 131.800 Total $521,800 $547,500 • The par value of the common stock is $1 per share

what is the return on equity use2009 values

Answer 1

Solution:

Net Income = $56,200 (in 2009)

Equity ( in 2009) = Common stock + Retained earning = $140,000 + $131,800 = $271,800

Return on Equity = Net Income / Equity = $56,200 / $271,800 = 20.68%