Question

- Pizza Store reported total assets at December 31 totaling $291,000. The following selected amounts were taken from its financial statements for its year ending December 31:

Retained earnings	$56,000	Sales	$340,000
Accounts receivable	7,000	Common stock	150,000
Inventory	21,000	Net income	35,000
Notes payable	16,000	Dividends paid	12,000

How much (roughly - which of the below is closest) is the company’s return on equity as of December 31?

A. 10.35%

B. 16.99%

C. 62.57%

D. 29.26%

Answer 1

Stockholder equity = Common stock + Retained earnings

= 150,000+56,000

= $206,000

Return on equity = Net income / Stockholders equity

= 35,000/206,000

= 16.99%

Correct option is B.

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