Question

Jerry Rice and Grain Stores has $4,430,000 in yearly sales. The firm earns 2 percent on each dollar of sales and turns over its assets 4.5 times per year. It has $167,000 in current liabilities and $342,000 in long-term liabilities. a. What is its return on stockholders’ equity? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

Answer 1

return on stockholders’ equity = 18.63 %

Step-by-step explanation:

given data

sale = $4,430,000

earns = 2 %

assets = 4.5 times per year

current liabilities = $167,000

long term liabilities = $342,000

to find out

return on stockholders’ equity

solution

we get here Net profit will be here

net profit = 4,430,000 × 2 %

net profit = $88600

and

Total assets is =
`(4,430,000)/(4.5)`

Total assets = $984444.44

and

stockholders’ equity will be

stockholders’ equity = $984444.44 - $167,000 - $342,000

stockholders’ equity = $475444.44

so

return on stockholders’ equity =
`(88600)/(475444.44)`

return on stockholders’ equity = 0.186352

return on stockholders’ equity = 18.63 %